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.
NZ fixed interest is the asset class of NZ-issued debt securities: NZ government bonds (issued by the New Zealand Debt Management Office); local-authority and Kāinga Ora bonds; and NZ corporate bonds (issued by listed and unlisted NZ companies). The most-cited benchmark for NZ retail fixed-interest mandates is the Bloomberg NZBond Composite 0+ Yr Index or a similar Bloomberg/S&P composite.
NZ fixed interest typically sits in the income/defensive sleeve of diversified-multi-asset funds — 10–35% of total assets in a Balanced fund, more in Conservative profiles, less in Growth. The sleeve provides regular coupon income, lower volatility than equities, and a partial diversification benefit when equity markets fall (the historical equity-bond negative correlation, which weakened in 2022).
NZ fixed-interest income (coupon and accrued interest) is taxable. Inside a PIE the income is taxed at the investor's PIR, capped at 28%; held directly in a personal account it is taxed at the investor's marginal rate via RWT, up to 39%.
Related terms
-
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.
-
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.
-
RWT
Resident Withholding Tax (RWT)
Tax that NZ banks and bond issuers deduct at source from interest payments to NZ-resident investors, at the investor's nominated RWT rate.
-
asset-allocation
Asset allocation
The percentage split of a fund's portfolio across asset classes: equities, fixed interest, listed property, cash, alternatives. Drives the fund's risk and return profile more than security selection.