global bonds
International fixed interest
Offshore-issued debt securities — sovereign and corporate bonds outside NZ. Typically held in NZD-hedged form to neutralise currency volatility on the defensive sleeve.
International fixed interest is the asset class of offshore-issued debt securities — US Treasuries, German Bunds, Japanese government bonds, sovereign debt of other developed-market and emerging-market countries, and offshore corporate bonds. NZ retail mandates usually access the asset class via offshore-domiciled passive or active sub-funds, with the Bloomberg Global Aggregate Index (hedged to NZD) the most-cited benchmark.
Currency hedging is conventional on international fixed interest. Unhedged offshore bonds carry currency volatility that is typically larger than the underlying interest-coupon return, which defeats the defensive purpose of holding fixed interest in a diversified portfolio. The hedging cost is embedded in the annual fund charge.
International fixed-interest income is taxable in NZ. Inside a PIE the income is taxed at the investor's PIR, capped at 28%; the PIE applies FIF rules to any offshore-fund holdings at the fund level.
Related terms
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NZ bonds
NZ fixed interest
NZ-issued debt securities — NZ government bonds, NZ corporate bonds, and NZ residential mortgage-backed securities. Used as the income/defensive sleeve of diversified NZ retail funds.
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hedged-vs-unhedged
Hedged vs unhedged (NZD)
A hedged fund neutralises foreign-currency movements back to NZD using forward currency contracts. An unhedged fund leaves foreign-currency exposure in place — returns include the NZD/foreign-currency move.
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PIR
Prescribed Investor Rate (PIR)
The tax rate applied to your share of a PIE fund's taxable income. NZ has three PIRs for resident individuals — 10.5%, 17.5% and 28% — chosen using a two-year look-back of taxable + PIE income.
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FIF rules
Foreign Investment Fund (FIF)
A New Zealand tax regime that taxes NZ-resident individuals on the holding of most foreign shares and non-PIE foreign funds above a NZ$50,000 cost-basis de minimis threshold.