Australian Government Bonds (AGBs) are loans you make to the federal government in exchange for regular interest. The exchange-traded versions trade on the ASX, so retail investors can buy them like shares.
Two flavours
- Treasury Bonds (TBs): pay a fixed rate of interest (the coupon) twice a year, with the face value repaid at maturity.
- Treasury Indexed Bonds (TIBs): the face value rises with inflation (CPI), so the return is partly inflation-protected.
Why hold them
AGBs are considered the lowest-risk fixed income in Australia — backed by the government rather than a bank. They suit investors who want predictable income and capital stability.
The catch
If you sell a bond before maturity, its market price can be higher or lower than what you paid — bond prices fall when market interest rates rise, and vice versa. Hold to maturity and you get the face value back.
Unlike bank deposits, bonds are not covered by the Financial Claims Scheme, but the issuer is the Commonwealth of Australia.