Fixed Income Products
What are fixed income investments?
Fixed income1 investments generally provide an established return on a fixed schedule. One of the most popular types of fixed income products are bonds, through which you lend money to a government, municipality, corporation, federal agency or other entity known as an issuer. In return for that money, the issuer provides you with a bond in which it promises to pay a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it matures, or comes due. Many of these investments can offer tax-free returns on the municipal, state and federal levels. Individual bonds can be useful in a strategy that seeks to preserve capital and generate a predicable return when they are held to maturity, subject to issuer credit risk2.
An array of fixed income products
HSBC Securities (USA) Inc. offers access to a wide variety of fixed income products including:
- Municipal bonds : Debts issued by states, municipalities or counties that are free from federal taxes and usually free of state and local taxes. Municipal Securities may be subject to the federal Alternative Minimum Tax.When investing in fixed income products you should seek tax advice from your independent tax advisor.
- Treasury notes and bonds : U.S. Government debt that carries a fixed interest rate, usually with a maturity of 1-10 years. Interest income is exempt from state and local income taxes, but subject to federal income taxes.
- Government-sponsored enterprises (GSEs) / Agency : Bonds issued by financing entities created by Congress to fund loans to certain groups of borrowers such as homeowners, farmers and students. i.e. Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) are privately owned corporations, while the Federal Home Loan Banks and the Federal Farm Credit Banks are systems comprising regional banks. All GSE debt is not guaranteed by the federal government, whereas government agencies such as Government National Mortgage Association (Ginnie Mae) are divisions of the government whose securities are backed by the full faith and credit of the United States.
- Sovereign bonds : Issued by a national government and denominated in a foreign currency
- Domestic corporate bonds
- Unit Investment Trust or Bond Funds
- Brokered CDs7