Ankit Shrestha
5 minutes reading time
A new year brings fresh opportunities for Australian income investors, with bond yields now at multi-year highs following the RBA’s fastest rate hiking cycle in 40 years and minimal cuts since – a combination of conditions not often seen in recent market history.
For investors who are seeking reliable income, this creates a rare chance to secure attractive returns before markets potentially shift again.
What’s been happening in bond markets lately?
Fixed income markets have repriced sharply in recent weeks: from its mid-October 2025 low, the Australian 10-year government bond yield has since increased by nearly 70 basis points1.
A combination of persistent inflation pressures, solid employment growth and broad-based GDP expansion has shifted market expectations from continued monetary easing to a potential hiking cycle in 20262. While headline GDP slightly undershot forecasts, underlying demand is broadening across household consumption, housing investment, business capital expenditure and public spending.
The resulting rise in yields – both government and corporate – has created an attractive entry point for investors seeking income. For those looking to capitalise on these conditions, the question may not be whether yields are attractive – it may be how quickly to act before markets potentially move again.
Why do rising yields matter?
Bond yields rise when markets anticipate higher interest rates. For investors, this means corporate bonds and bond ETFs can allow them to ‘lock in’ higher income now. Historically, periods of rising yields have created opportunities to secure attractive returns before markets fully reprice.
Rate hikes aren’t guaranteed, however. Betashares Chief Economist David Bassanese recognises the upside risks, but his base case remains two rate cuts in the second half of 20263. The RBA’s next move will likely depend on inflation and unemployment data.
This could create an opportunity to act today. If rate cuts materialise, locking in today’s elevated yields can help secure attractive income before rates fall. If rates rise in line with market pricing, corporate bond ETFs allow you to effectively ‘lock in’ those expectations upfront – unlike bank deposits, which typically only rise after the RBA hikes interest rates.
What does this mean for investors seeking income?
For income investors seeking an alternative to term deposits for attractive yields, the numbers tell the story.
The Betashares Defined Income Bond ETF suite is currently delivering its highest net-of-fee yields since inception, ranging from 4.59% p.a. to 4.87% p.a.
|
ETF |
Fund maturity |
Portfolio duration |
Avg credit quality |
Yield to worst (net of fees) |
| 28BB 2028 Fixed Term Corporate Bond Active ETF |
May 2028 |
1.74 years |
A |
4.59% p.a. |
| 29BB 2029 Fixed Term Corporate Bond Active ETF |
May 2029 |
2.58 years |
A+ |
4.67% p.a. |
| 30BB 2030 Fixed Term Corporate Bond Active ETF |
May 2030 |
3.44 years |
A |
4.87% p.a. |
As at 8 January 2026. Each Defined Income Bond ETF’s Yield to Worst (YTW) is net of fees and represents the annualised total expected return of the Fund’s portfolio if the underlying bonds are held to maturity or called and do not default, and the coupons are reinvested at the YTW. The YTW is the lower of the Yield to Maturity (YTM) or Yield to Call (YTC). Assumes no change in interest rates. Credit ratings are opinions only and are not to be used as a basis for assessing investment merit. Ratings and yields are subject to change over time.
These rates are, as of writing, higher than both the ‘big four’ banks’ term deposit rates and the highest available TD rates for similar terms4. Unlike term deposits, these ETFs offer daily liquidity and diversification across multiple issuers – helping investors maintain flexibility while reducing concentration risk.
The Defined Income Bond ETFs invest in diversified portfolios of investment-grade Australian corporate bonds and are designed to provide predictable monthly income and a defined maturity date, giving investors greater certainty around outcomes compared to traditional bond funds through paying back the final value at the fund’s maturity.
Having said that, ETFs carry their own risks and, unlike term deposits, do not receive the benefit of any government guarantee. It’s important to note that the Defined Income Bond ETFs are not substitutes for term deposits, and to be aware of the risks involved with investing in corporate bonds (to which the ETFs provide exposure).
Take advantage of the income opportunity
Yields on quality corporate bonds are near multi-year highs. By strategically allocating part of a portfolio to the Betashares Defined Income Bond ETFs, investors can capture reliable monthly income, maintain liquidity and diversify their portfolio.
Investors can explore the Defined Income Bond ETF range on Betashares Direct, while calculators on each of the individual ETF’s pages (28BB, 29BB and 30BB) allow investors to model potential income and cashflow with more confidence. By seeing how much income could potentially be added to their portfolio, investors can make better informed decisions about positioning for elevated yields in 2026.
Sources:
1. Source: Bloomberg. As at 6 January 2025. ↑
2. Source: ASX/RBA Rate Tracker. As at 5 January 2026. https://www.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker ↑
3. https://www.betashares.com.au/insights/economic-market-outlook-h126/ ↑
4. Source: Canstar, as at 12 December 2025. https://www.canstar.com.au/term-deposits/compare/best-term-deposit-rates/ Term deposit rates measured as interest that can be earned per annum in each product. The highest 12-month term deposit rate available at any bank, according to Canstar, is 4.45% p.a. as at [date]. ↑