Australian Government Bonds

[megaduff]

Hi guys,
I'm new to the forum and am just finishing "The permanent portfolio" book. I live in Perth Australia and am trying to work out how best to implement the Government bond allocation here in Australia.
http://australiangovernmentbonds.gov.au
I notice now that Australian Government bonds are now 'Exchange Traded'

Exchange-traded Australian Government Bonds (AGBs) offer a convenient and readily accessible way to invest in Australian Government Bonds. Australian Government Bonds are debt securities issued by the Australian Government.

Would this be an appropriate way to go when purchasing the Government bond portion? If I check out one, e.g. GSBG29 it seems to be extremely lightly traded with large spreads. Is this something to worry about? I would certainly worry if it were a normal stock I was purchasing.

Thanks for your opinions.

Andy

[Ad Orientem]

Hi megaduff
Welcome to the forum. Australian bonds can be a bit of a problem because of their more limited maturity. Check out this thread and see if it offers some insights.

http://gyroscopicinvesting.com/forum/bo ... ore-bonds/

[megaduff]

Thanks AD. That is some interesting reading. I'm still a bit puzzled how best to buy the Australian bonds.

[Ad Orientem]

Thanks AD. That is some interesting reading. I'm still a bit puzzled how best to buy the Australian bonds.

Purely from a convenience perspective I favor ETFs for everything except gold. That said, your mileage will vary. You will need to consider expense ratios and any related fees or taxes and how much you are willing to shell out for convenience. Also directly holding bonds adds a layer of insurance though I tend to think that any scenario that would shut down ETFs would likely be one where gold would become the default currency.

Also you may need to do some deviating from the traditional allocation to take into account the shorter duration on Australian long bonds.

[Ad Orientem]

Here is another thread on Australian PPs...

http://gyroscopicinvesting.com/forum/bo ... llocation/