As I understand it, these pay a fixed margin over the bill rate...

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    As I understand it, these pay a fixed margin over the bill rate which varies more or less as cash rates vary. They were often originally issued at a price of say $100. The interest payable from time to time is based on this original price so as cash rates have fallen over recent years so the market price has fallen well below $100. As opinion grows that rates (in Australia) will soon start to go back up, the price rises. Whenever it looks like rates (in Australia) may not start going back up anytime soon, the price falls. There can be other complications. The $100 face value may never be repayable ie you receive interest forever unless you sell the security to an interested buyer - but, in some cases the issuer may be required or be entitled to buy back the security, possibly at the issue price of $100. I am aware of one such security (NABHA.AX) which I understand can be redeemed by NAB at a price of $100 if they so desire. I own some of these. Please don't take this as advice and please check what I have said with your advisor before you commit any funds to this type of investment.
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