BetaShares Australian Bank Senior Floating Rate Bond ETF

ASX:QPON

BetaShares Australian Bank Senior Floating Rate Bond ETF

ASX:QPON
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$26.05 (+0.1%)
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Forum Topics QPON QPON Cash

Pinned straw:
DrPete
Added one year ago

For those sitting on cash, QPON ETF from Betashares is a reasonable option. Floating rate bonds from major Australian banks. Current running yield 5.14%. Management fee 0.22%.

Because these are floating rate bonds, the interest rate will move up and down in line with bond yields, but capital is preserved and won't go up or down with bond prices. Price has been extremely stable since listing in 2017, with biggest drop being the liquidity crunch in Mar 2020 where there was a temporary drop of 2% which recovered the following month.

Nice combination of term-deposit-like high interest and capital preservation, but with immediate access to your funds.

Main downside is probably brokerage, so depending on the fee you pay you may not want to use this ETF like a transaction account with money frequently moving in and out. Also, money isn't covered by the $250k Fed Govt deposit guarantee, but if the major Australian banks default on their bonds we'll be hoarding more than toilet paper.
Shapeshifter
Added one year ago

Thanks @DrPete !

Strawman is the gift that keeps on giving!

13
Strawman
Added one year ago

Love this @DrPete

For the life of me I can't understand why any income focused investor would buy stuff like Telstra or the Banks today given they only offer a tiny premium on what's being offered here.

(it's a bit different if you already hold and have a big tax bill to account for)

Not saying that these income oriented stocks are headed to zero or anything extreme like that, but the income they offer is far from guaranteed and (according to consensus guidance at least) are not expected to materially grow any time soon. Where's the 'risk premium'?

Of course, if you have a high conviction rates will drop soon, then there's some justification, but you would also need to ask yourself what would warrant a significant and sustained drop in interest rates to begin with, and what that might mean for some of these companies.

All that said, there's a point in the cycle where you'd happily back up the proverbial truck on some of these dividend titans. Just not sure now is the time.

23
edgescape
Added one year ago

Being an ETF you will also get those EOFY tax statements where you need to fill in all those boxes. So there is an admin overhead too at tax time.

14
DrPete
Added one year ago

Yeah fair enough @edgescape for anyone who is a DIY investor. But no boxes if you use Sharesight and an accountant - they are two of my best ROI recommendations.

9
Remorhaz
Added one year ago

I note that there are a number of Floating Rate ETF's/Funds - wonder if anyone had any thoughts on others?

VanEck FLOT (which has same MER 0.22% and similar current running yield of 5.07% and same ave credit rating (AA-), but is perhaps more diversified with 196 holdings (predominantly from Aus but also from many other countries) vs Betashares QPON with 12)

VanEck also have SUBD (MER 0.29%, with a higher running yield 6.06% but with a lower ave credit rating BBB+, similar to QPON it has 19 holdings all Aus based)

or even Coolabah Floating-Rate High Yield Fund (YLDX) (a managed fund) which also invests in Aus FRN's - with a much higher MER of 1%, but also a higher running yield of 8.61% and ave credit rating of A (and I expect much more active trading, and leverage involved)

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