One key concept highlighted in the advisory is yield to maturity — the total annualised return an investor can expect if the bond is held until maturity. This figure takes into account the bond’s current market price, coupon payments, and time to maturity.
Importantly, YTM is not a guaranteed return. It is subject to fluctuation depending on various factors, including prevailing market interest rates, liquidity conditions, creditworthiness of the issuer, and time remaining to maturity. If an investor chooses to sell the bond before its maturity, the realised return may differ significantly from the indicated YTM.
Another fundamental concept is the coupon rate, which refers to the fixed annual interest paid by the issuer, typically on a semi-annual or annual basis. While it provides regular income—typically semi-annually or annually—it is subject to the financial health and reliability of the issuer. Any default or delay in payments can negatively impact investor returns.
The exchanges also underline the inverse relationship between bond prices and yields. When market interest rates rise, bond prices fall, increasing yields, and vice versa. This dynamic is central to understanding interest rate risk and bond price movements.
Brokerage reversals or zero brokerage offerings can enhance effective returns by lowering investment costs. Still, investors must account for all associated fees, charges, and applicable taxes to assess final returns accurately.
