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Bonds FAQs

What are bonds?

Bonds are debt securities, much like an IOU. When you buy bonds, you're lending money to a government or corporation, broadly known as "issuers". Issuers may use the money to fund their operations or investments. And in return for the loan, the issuer will generally pay you an income at a specified rate on specified dates during the life of the bonds unless they are zero-coupon bonds. You'll also be repaid the face value ("principal amount") of the bonds when they mature.

Bonds are usually seen as a long-term investment and can have terms of up to 30 years, although 5 to 10 years is the normal investment period. They tend to have a high entry level, with a minimum investment of more than RM250,000 or its equivalent in foreign currency. Many fund managers use bonds as a stable element in unit trust products. Bonds are available through brokers and banks.

What is the relationship between interest rates and bond prices?

They are inversely correlated. When interest rates fall, bond prices rise; and vice versa. If you buy a bond and hold onto it until it matures - as many investors do - rising interest rates will not affect the principal amount you receive upon maturity. But if the interest rates go up and you need to sell your bonds before they mature, their value may have gone down and you may have to sell them at a loss. If the interest rates have gone down since you bought the bonds, the value of your bonds may have gone up and that will give you what is known as a "capital gain".

How can I benefit from investing in bonds?

  • Gain more returns via bonds, potentially.
  • Enjoy a regular stream of interest income, usually payable on a half-yearly basis. The interest you will earn by investing in bonds is usually higher than what you would earn on banking deposit accounts with similar tenures. Bonds also offer predictable principal repayment upon maturity.
  • Diversify your investment risk. The inclusion of bonds may make your portfolio more stable as bonds have low correlation to other asset classes.
  • Reap potential long-term capital gain. Bond prices often move in the opposite direction of market interest rates. If market interest rates fall, you may make a capital gain from the price appreciation. Price appreciation may also happen when the perceived creditworthiness of the bond's issuer strengthens or the demand for the bond exceeds its supply.

What kinds of bonds are available through HSBC Bank Malaysia Berhad ("HSBC")?

We have a wide selection of investment-grade bonds for our customers to choose from. These bonds are issued by governments, supranationals or well-known corporations from around the world, and they are available in different currencies and tenors. Besides conventional bonds, we offer the Shariah-compliant debt instrument Sukuk, and high-yield bonds to our top tier Premier clients.

What is the minimum initial investment amount and what are the subsequent multiple amounts?

The minimum initial investment amount and the subsequent multiple amounts differ from bond to bond. Generally, the minimum initial investment amount for a Malaysian Ringgit ("MYR") denominated bond is RM200,000, and subsequent amounts are in multiples of RM100,000.

For bonds denominated in foreign currencies, the minimum initial investment amount and the subsequent multiple amounts - in their respective currencies - are predetermined upon the issuance of the bond in its primary market.

Please refer to the fact sheet for the individual bond to find out its minimum initial investment amount and subsequent multiple amounts.

Is there a minimum investment period or a lock-in period?

No. Bonds are mainly medium to long-term investments, not short-term speculations. If you're planning to invest your funds in bonds, you should be prepared to do so for the full investment tenor, i.e. hold onto them until they mature. If you choose to sell them before maturity, you could lose part of or all of your investment. Hence, you're advised to consider whether investing in bonds is suitable for you, given your own financial circumstances and investment objectives.

Is my investment guaranteed by HSBC?

No. Bonds are subject to the actual and perceived creditworthiness of the issuer, and the guarantor (if applicable). The issuer and/or guarantor do not assure protection against a default on repayment obligations. If the issuer/and or guarantor defaults on the bond, you may not be able to recover the principal and any coupon payments, i.e. the periodic interest payments that you receive as a bondholder from when the bond is issued to when it matures.

As a reminder, bonds are not insured by Perbadanan Insurans Deposit Malaysia (PIDM). That means you will be exposed to the credit risk of the issuer and guarantor, and you will have no recourse to us.

Can I invest in bonds online or do I need to visit a branch?

Please contact your Relationship Manager as we currently do not offer any online services for bonds.

What are the risks of investing in bonds?

All bonds are subject to investment risks including possible loss of the principal amount invested. Different types of bonds carry different levels of risk, with some higher than others. The more general risks include general securities risk, principal risk, return risk, issuer or credit risks, legal risks, country risks, currency risks, liquidity risks, market risks, interest rate risk, inflation risk, prepayment risk, etc.

For more details, please refer to the Bond Investment Key Features Document and the fact sheet for the respective bond.

Is there a currency risk associated with investing in bonds?

Yes, if you invest in bonds denominated in currencies other than your home currency. Foreign exchange markets may move against you. That means there's a risk your net proceeds may be significantly lower than your initial investment amount before or upon maturity, as any income or gains you made may be negated upon converting them into your home currency or from the currency the initial funds were converted to.

What fees and charges do I need to pay when I invest in bonds?

None. You don't need to pay any fees and charges for investing in bonds.

Will HSBC provide me with information on the various bonds?

Yes. We can provide you with a base prospectus upon request. You can also find a summary of the bond's most important features in its fact sheet.

We provide real-time bid-and-ask bond prices to help you make timely decisions on buying / selling bonds to capture potential gains. You can also contact your Relationship Manager for pricing information.

Will HSBC provide me with regular statements of my bond investments?

Yes. We will provide you with a monthly statement. You can also access your investment portfolio through online banking as an HSBC customer.