These were the first capital market products offered by the bank and represent the bank’s largest source of funding.
Typical bond terms are as follows:
- Fixed or floating interest (coupon) rates
- Taxable or tax free interest income
- Interest paid semi-annually or at maturity
- Principal repaid at maturity
The bonds are attractive to investors looking for:
- High quality interest income investments
- Guaranteed principal
- Assets which qualify for the Statutory Deposit and Fund under the Insurance Act
- Assets which pay regular semi-annual interest
Taxable equivalent rate for tax free bonds:
Using the formula below: 6.75% tax-free is equivalent to 9.0% taxable for companies with a 25% marginal tax rate.