What a bond actually is
When you buy a bond you are lending money to a company, bank or government for a fixed period. In return the issuer promises to pay you interest — called a coupon — at set intervals, then repay your principal on the maturity date.
Unlike shares, you are a lender rather than an owner. You do not share in profits, but you rank ahead of shareholders if the issuer runs into trouble.
- Face value: the amount repaid at maturity, usually NZ$1.00 per bond.
- Coupon rate: the annual interest rate applied to face value.
- Maturity: the date your principal is repaid in full.
- Issuer: the borrower whose credit quality determines your risk.
How coupons are paid
New Zealand retail bonds usually pay coupons semi-annually or quarterly, in arrears, directly to your nominated bank account. A $50,000 holding in a 6.78% bond paying semi-annually generates roughly $1,695 gross per coupon payment.
Resident withholding tax (RWT) is deducted at your elected rate before the payment reaches you, so the cash you receive is a net figure.
Buying at issue vs buying on market
At issue, bonds are offered at face value through brokers during an offer period. Once listed, they trade on the NZX Debt Market at a price that moves with interest rates: if market rates rise, existing bond prices fall, and vice versa.
Holding to maturity means price moves do not affect what you get back — you receive face value plus the remaining coupons, assuming the issuer pays.
Credit ratings and ranking
A credit rating is an independent opinion on the issuer's ability to repay. Investment-grade ratings (BBB- and above) signal lower default risk and usually pay lower coupons than unrated or sub-investment-grade issues.
Ranking matters too: senior secured ranks ahead of senior unsecured, which ranks ahead of subordinated bonds and shares.
Steps to invest
Investing in a New Zealand bond offer is simple with KiwiBonds.co.nz.
- Sign up with our form and tell us which bond interests you and how much you want to invest.
- A broker from a regulated company will email you the offer documents, facts and next steps.
- Read the product disclosure statement (PDS) for the offer.
- Apply for your desired amount above the minimum, usually $10,000.
- Receive coupons to your bank account until maturity.
Frequently asked questions
Can I sell a bond before maturity?
Yes, if the bond is quoted on the NZX Debt Market. You sell at the prevailing market price, which may be above or below what you paid.
Are bonds covered by the Depositor Compensation Scheme?
No. The DCS covers eligible bank deposits, not corporate bonds. Bond investors rely on the issuer's ability to pay.
What is the minimum to invest?
Most New Zealand retail bond offers start at $10,000, with additional amounts in $1,000 multiples.
How is bond income taxed?
Coupon income is taxable and RWT is deducted at your elected rate. See our risk and tax guide for detail.