This is fascinating @neke86_, thanks for posting.

I've never bought bonds, and am reasonably naïve as to the finer details of fixed interest investing, but can you help my understand why anyone would buy, say, the GSBG25 bond -- with a yield to maturity of 2.74% it's offering a negative real return. And I can get >4.5% in a plain old term deposit with as a similar maturity.

I assume it's something of a bet on rates falling?

I find it harder still to conceptualize why anyone would lend money to the Government for 30 years for a nominal yield of under 5% (!!) -- but again, i suppose these are all about making bets on interest rates.

What am I missing?

In why lend to the government for 30 years, i guess you can compare the current YTM to the current cash rate - as you don’t have to hold it to maturity. Of course institutions get forced to buy them.

Then there’s the potential cap gain if you do thing rates will fall.

The 2.74% though i have no idea why people would buy that no.

thanks guys -- i can see the logic.

I guess for me I'd be put off somewhat by the opportunity cost in comparison with equities if i was looking to put money aside for a decade or more. Especially given some of the decent dividend stocks out there (if regular income was important)

I cant think of anyone I know who's really across all of this, but I'll put the feelers out.

GSBG33 and GSBK54 I think are sort of compelling as a replacement for using a bank account because I think 4-5% running/ytm is pretty fair over such a long time frame and you maintain liquidity you don't get in a term deposit.

Isn't the issue though that you're getting some pretty savage interest rate risk with that liquidity? Like the modified duration on the BK54 is 15.89 (it's 7.3 on the BK33) that's pretty chunky and, imo, makes it not really comparable to a bank account if the goal of a bank account is just to preserve capital. At least with a bank account you're getting some inflation protection whereas with (non-inflation protected) bonds you're sort of taking a bet on the opposite. Those guys in BK51 learnt about duration risk the hard way! Ouch.

ha, well if i'm not allowed to say magic internet money, i think a safe (but boring) option would be something like ASX:VAS -- a 3.7% trailing yield that is ~60% franked isnt terrible.

I think the risk of capital loss is very low over a 10 year period (i don't believe there's ever been a 10 year period where the ASX delivered a loss from a total return perspective). There are no guarantees with anything -- even bonds -- but there's always a trade-off with lower risk assets. Yes, safer, but the cost is lower returns.

Maybe rates go to 6, 7, 8% and you're underwater, but where we're at today feels like it's closer to the long term mean.

I think the issue though, at least from my pov, is rates at 8% would probably be because of another breakout in inflation and so when the bond price has fallen 30%-40% you either take the real capital loss to get higher rates, or ride it out and take the slow burn corrosion of inflation eating away at the face value. I guess it's just my own mindset toward cash is that it's not something that should ever keep me up at night.

I have to be honest, I just keep my cash in a couple of Macquarie accounts and an ANZ account which is pretty lazy. I guess you could go down the FRN path too, but federal government guarantees bank accounts to $250k/account which if you were chasing yield seems tough to beat given some of the rates I see from a quick look around and seems to make it the most compelling.

It's a shame there's no corporate bond market of any real size in Australia. It could probably throw up some interesting stuff that would make people engage a bit more with fixed interest more generally. I do agree with you that I would rather invest in fixed interest than buy something like TCL for the dividend. But the mindset of the Aussie investor is franking credits first and foremost – that's probably how something as poor as those hybrids came into being: Debt like when times are good, equity like when times are bad, but fully franked so no worries!