Government Bond (GSBG25)

Hi Scott,

The yield of 3.25% is unfranked (all cash) and refers to the yield when the security was issued at $100. If the security is trading above $100 then the yield is less, and if it trades below $100 the yield is more. You do need to take into consideration accrued interest in that calculation to get a true number, and to do this we use the $1.625 paid 2x per year (with the security trading ex-divi on the 12th Oct & 12th April). An easy way to think about this without access to more advanced programs is calculating the distribution per day i.e. 325c / 365 days = 0.89c per day assuming bought at $100.

In terms of hybrids, some inefficiencies do play out in terms of pricing and there could be some opportunity to switch around into bonds etc, but it’s very hard to quantify / say definitively if this is the case.

Bear in mind that hybrid yields are quoted inclusive of franking, so they can be compared on a fair playing field with other fixed income securities.