Bank savings

Some alternatives to a savings accounts and term-deposits

There is a total of $526 billion in savings accounts across the nation according to financial comparison website The recent cut of 0.25% of the RBA official cash rate is likely to be passed on in full to just about all of these depositors. This could amount to $1.3Bn less per year in interest payments according to Finder, who added that the biggest losers were likely to be “saving for their first home, or retirees relying on their savings as a form of income”.

With the RBA expected to cut interest rates further, it begs the question – where to for savers?

Luckily there are a few different options for those looking to deposit or lend using ASX listed products.

ASX Listed Hybrids

ASX listed hybrids are usually tied to market interest rates, so a reduction or expected reduction in the official RBA cash rate will reduce the yield of a hybrid. However, ASX listed hybrids tend to pay yields that are well above official RBA cash rates, and well above the interest rates of Australian savings accounts.

However, there are additional risks associated with ASX listed hybrids, with conversion risk perhaps the most significant. If there is a substantial reduction in the value of the company that issued the hybrid (usually between 50-55% fall in share price), there is a chance that your hybrid will be converted into shares in the company that issued the hybrid.

ASX Listed Bonds

There are also plenty of ASX listed floating rate and fixed rate bonds. For the floating rate bonds, there is again a likelihood that a reduction or expected reduction in RBA cash rates will lower your yield payments, but the payments are again likely to receive a premium above official interest rates.

With fixed rate bonds, the yield payments are set when the bond is first issued – which means that future rate cuts aren’t going to reduce the payment you receive. However, expected or actual rate cuts will increase the price at which a fixed rate bond trades.

ASX Listed Fixed Income ETFs

Listed on the ASX are also many exchange-traded-funds (ETFs) focused on fixed income. These may be focused any sort of lending product, be it US based corporate debt, Asian government bonds, or practically anything in between. Many of these ETFs could have no direct link to the official RBA cash rate, and those that do are again likely to pay a premium that would not be received were you to sit your funds in a trading account.


The RBA cash rate is sometimes considered a proxy for the risk-free rate of return, and most products providing a return above this level are considered to hold some form of risk. It is therefore worth keeping in mind that many of the products discussed above hold some form of additional risk – and as a result, are likely to provide some sort of additional return. If you would like to discuss some of the above investments, or any other ASX-listed product, please don’t hesitate to contact your TradersCircle adviser on 03 8080 5788 or at