Long Term Bonds Investment
At Citibank International Personal Bank, we understand your need for an investment with the flexibility to cater to your various financial objectives. That is why we make available to you a wide selection of quality bonds to suit your investment objectives.
Bond investments allow you the flexibility to choose from bonds of various currencies and tenures to diversify your portfolio and at the same time enjoy a regular stream of income from your long term investments in the bond market. Based in Singapore, our bond offerings provide you with long term investment returns as part of a holistic wealth management approach.
If you’re looking to invest in bonds, talk to our relationship manager about the long term investment plan options today.
- You will enjoy a regular stream of income
- You will enjoy capital appreciation if you sell the Bond when the price has appreciated (please note prices may also decline)
- You can diversify your investment portfolio and your risk if you have a portfolio consisting of mainly equities
What are bonds?
- Bonds are debts issued by governments of countries (e.g. USA, Australia, Germany) and large corporations (e.g. Citigroup, IBM, Toyota) to raise funds to finance projects or businesses.
- Bonds are flexible instruments that could provide both short-term and long-term gains.
- Bond tenures can range from as short as 1 month to 30 years or even longer.
When you invest in a bond, you are actually lending to the issuer of that bond and this will provide you with a regular income through the periodic coupon payments and the repayment of your principal at maturity.
As most bonds are tradable securities, you can either hold a bond until maturity or sell it before maturity at the prevailing bond market price.
What you will need
- Minimum US$100,000
How does a Bond Work?
Here's an example of how you can earn returns when you purchase a bond and invest in the bond market through Citibank International Personal Bank.
Suppose you bought a nominal amount or face value of US$250,000 of Citigroup bond in 2009. This bond pays a fixed coupon of 5.8% p.a. and matures in March 16, 2012.
This bond pays coupon twice a year. This means that each year on March 16 and September 16, you will be receiving fixed coupon payment of US$7,250 [(5.8% x $250,000)/2].
At maturity on Mar 16, 2012 the bond issuer, Citigroup, will pay you the final interest of US$7,250 + the principal of US$250,000.
But should you decide to sell the above bond on March 16, 2010 (before maturity), 2 scenarios could occur:
Suppose the market price of the bond is higher than the par value of US$100:
|Market price of bond||= US$102|
|Redemption proceeds from sale of the bond||= Market price x Nominal amount
|= US$102 x US$250,000
However, should the market price of the bond be lower than the par value of US$100, the scenario below could occur:
|Market price of bond||= US$99|
|Redemption, proceeds from sale of the bond||= Market price x Nominal amount
|= US$99 x US$250,000
If you hold your bond till maturity, your capital* would not be affected by price fluctuations because the issuer will repay you the full value (principal amount) of the bond.
* Please note that repayment of principal is subjected to the credit risk of the issuer.
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You will need to submit the following:
- Structured Note Transactions Agreement
As with any investment, bonds also carry risk. Comparing deposits, high credit quality bonds and stocks, deposits rank the safest followed by high credit quality bonds.
- Market risk is the risk of bond prices fluctuating as a result of changes in interest rates and inflation outlook. Generally, when interest rates are on the rise with inflationary outlook, bond prices will fall. Moreover, the longer the maturity, the more sensitive the bond price is to these macro-economic changes.
- Investors assume the credit risk of the issuer. This product is not a bank deposit, is not government insured, is not an obligation of nor is it guaranteed by Citibank Singapore Limited/Citigroup Inc. or their affiliates (unless expressly stated in the relevant product documentation).
- During adverse market conditions, holders of a bond may not be able to liquidate all or part of their securities as and when they require. In addition, certain bonds may not be marketable and as such, cannot be liquidated before maturity. Investors should expect a rapid decrease in mark to market prices especially after a large coupon is paid. In the event the investor wishes to liquidate his bond before maturity, he/she will have to sell at the current available market price, which may result in a loss of principal. However, there can be no assurance that the investor will be able to obtain a firm bid price for the bond for an amount at which he/she wishes to sell.
- The investor assumes all settlement risks relating to failing to settle the bond on the relevant settlement date. In the event the issuer or counterparty fails to settle the bond, Citibank will return the money to the investor without interest. At maturity, funds will be passed on to the investor only after receipt of good funds by Citibank Singapore Limited from the issuer or counterparty. This may result in payment to the holders of this product on a date subsequent to the stated maturity date.
- Payment of bonds may be affected by the economics and political events in the country of the relevant issuer. The occurrence of a sovereign risk event could result in the loss of all or a portion of the principal invested should, as a result of any economic or political circumstances, payment may be made in the local currency of the country, of the relevant issuer instead of the original invested currency.
Foreign Exchange Risk
- Investors investing in bonds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may result in the receipt of reduced sums and/or a loss of principal when converted to the investor's local currency.
* The above is only a summary of some of the key risks in investing in the product. Detailed risk disclosures are set out in the documentation relating to the specific product. Prior to entering into a transaction, you should ensure that you have read and understood the nature of all of the risks associated with the investment in order to determine whether the investment is suitable for you in light of your experience, objectives, financial position and other relevant circumstances. You should consult with your legal, regulatory, tax, financial and/or accounting advisors to the extent you consider it necessary in making your own investment decision.
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- At Citibank, we make available to you a wide selection of quality bonds issued by reputable institutions in bond markets worldwide. You can choose from bonds of various currencies and tenures to best meet your investment objectives.
- When you invest into a bond with Citibank, you do not need to worry about the custody of the bond. Instead, Citibank will keep the bond for you and any coupon received will be credited automatically into your account.
Citibank offers you the choice to purchase several different types of bonds. You can invest in the bond market in a variety of ways, such as through:
Fixed Rate Bond
Coupon interest is known until the maturity of the bond
Floating Rate Bond
Coupons are variable and are frequently adjusted to reflect prevailing market interest rates. The advantage is that it provides the investor with a return commensurate with the prevailing market rate. When investing in Floating Rate Bonds, the investor is taking the bond issuer's credit risk. Compared to Fixed and Zero Coupon Bonds, Floating Rate Bonds are less risky investments
Zero Coupon Bond
No interest payable throughout the life of the bond. The offer price is usually at a deep discount (e.g. purchase at US$70 and matures at US$100 in 5 years)
The issuer has the option to redeem the bond before maturity on specific dates at specific prices. Due to this callable feature, the coupon rate is usually higher