SGD Bond With Coupon Reset Feature

In an interest rate rising environment, bonds with coupon reset feature will still do well.

Below is a SGD bond that has coupon reset feature:

ANZ 3.75% 23Mar2027
Price: 101.20
Currency: SGD
Yield to call: 3.50%
Call date: 23Mar2022
If no call, coupon reset to: SGD 5 years swap rate (currently at 2.20) + 1.372%
Moody's: A3
S&P: BBB+
Fitch: A+

On 23Mar2022 (which is the call date of the bond), if SGD interest rate is higher than today, coupon will be reset to a higher level as the reset formula is SGD 5 years swap rate + 1.372%.

In most cases, bond issuers do not want to pay a higher coupon, hence likely they will call back the bond. Bond investors will get back principal. At that time they can reinvest the cash into other bond.

Australia and New Zealand Banking Group Limited provides a range of banking and financial products and services. The Company's segments include Australia; New Zealand; Institutional; Asia Retail & Pacific; Wealth Australia, and Technology, Services and Operations (TSO) and Group Centre.