how kiwi bonds work
it may seem like an exotic and whimsical name for an investment security but it actually makes sense that they re called kiwi bonds when you consider the history and culture of the region where they originate new zealanders are often referred to as kiwis which is viewed as a term of endearment a kiwi is a bird that is native to the region the country s national rugby league team is also called the kiwis kiwi bonds are the main investment option available to individual investors living in new zealand as noted above they are fully backed and secured by the country s government which means they provide a higher degree of security for investors than bank issued and corporate bonds that s because there is little to no chance that the government will default on its obligations the downside though is that kiwi bonds offer much lower interest rates than other bonds kiwi bonds are denominated in new zealand dollars nzd and mature in six months one year two years and four years bonds may be redeemed upon maturity or whenever the bondholder chooses to do so the government of new zealand requires a minimum investment of nz 1 000 with a maximum investment of nz 500 000 for any single issue interest is paid at a fixed rate quarterly in arrears interest rates for kiwi bonds are set periodically by the new zealand debt management office based on moving averages of domestic wholesale rates as of february 2021 six month and one year bonds offered a return of 0 25 while two year and four year bonds offered a 0 50 return application forms and investment statements are available from the new zealand debt management office registry interested investors may also get information on these bonds as domestic registered banks investment firms brokerage companies chartered accountants cas solicitors and investment advisors special considerationsthe new zealand government limits who is eligible to purchase kiwi bonds in fact they are only available to residents of new zealand this means foreign investors are not able to purchase these bonds similarly citizens of new zealand who live abroad are also ineligible to invest in them since kiwi bonds are only open to new zealand residents citizens who live abroad are excluded from purchasing them advantages and disadvantages of kiwi bondsfinancial experts and advisors frequently tout the advantages of investing in kiwi bonds they often paint them as a sort of sleeper hit since they seemed to quietly fly under the radar of many investors but they are known for offering attractive potential rewards to those investors savvy enough to appreciate their benefits while markets and national financial systems in other parts of the world grappled with an assortment of natural and economic disasters causing unpredictable fluctuations in investing activities new zealand s economy remained stable and steady quietly enjoying positive growth and few disruptions their relatively low level of risk combined with the fact that new zealand has a central bank that has earned the trust of the global financial community created the perfect scenario for those seeking an appealing investment option at least for those investors observant enough to be paying attention new zealand was ahead of the curve in dealing with the 2020 crisis that has ravaged the global economy which should further bolster confidence in that nation s debt instruments going forward although they provide a guaranteed investment return as well as security there is a downside to investing in these bonds as mentioned above they do provide a very low rate of return ror this means investors who want to make a decent profit off their investments in a short period of time and those who can tolerate a greater degree of risk likely won t want to put their money in these bonds other bonds such as those offered by banks and large corporations will likely be a better fit for these kinds of investors 