Australian 3 Year Treasury Bond
What is the Australian 3 Year Treasury Bond?
An Australian 3 year Treasury bond, is a contract over 3 years that is issued by the Australian government. It is considered a benchmark interest rate. Treasury bonds are considered to be one of most highly traded long term debt securities.
Uses of Australian 3 Year Treasury Bond
This bond rate is used not only for a return on the face value, but also as a form of hedging against the Australian dollar interest rates. Bonds are capable of hedging and can be done via a futures contract.
Risks of Australian 3 Year Treasury Bond
There are a number of risks that can apply to bonds. These can include, but not limited to:
- Inflation risk - this is when the inflation rate increases to a larger rate than which the bond in returning
- Reinvestment risk - this is when the issuer recalls the bond prior to the maturity date