What Are Fixed Income Securities?
Why Everyone’s Talking About Fixed Income in 2025
Back in 2020, bonds were that boring uncle at the party no one talked to. Fast-forward to 2025? They’re the cool kid on the block. With central banks raising interest rates like crazy—Canada’s rate hit 5.25% in late 2023—investors are hunting for stable returns. Fixed income securities, with their promise of predictable payments, are suddenly the VIP section of investing.
Data from the Bank of Canada shows that fixed income holdings among retail investors grew by 47% between 2021 and 2024. When volatility strikes and crypto dives 30% overnight, a little peace of mind goes a long way.
Even millennials, once obsessed with tech stocks and meme coins, have shifted gears. A 2024 survey from RBC revealed that 38% of investors under 35 now hold at least one bond-focused ETF. Compare that to just 11% in 2019. That’s not a minor trend—it’s a generational pivot.
Institutions aren’t far behind either. Pension funds, insurance companies, and university endowments have reallocated billions into fixed income products. In 2023 alone, over $210 billion in net inflows moved into global bond funds, the highest level since 2008. Stability is back in style, and everyone—from Gen Z to boomers—is taking notice.
Fixed Income in a Nutshell – Explained Like You’re Five
Imagine you lend your friend $100. They promise to pay you $5 every year for 10 years, and then give back your original $100 at the end. That’s a fixed income security. It’s a promise with a schedule.
In the real world, this isn’t just between friends—it’s between governments, banks, companies, and investors. You lend them money, they pay you interest on a regular basis, and eventually return the full amount.
What Does “Fixed Income” Actually Mean?
No guesswork here. “Fixed income” means regular, predictable interest payments. It’s not like stocks where you hope the price goes up. With fixed income, you know how much you’re getting, and when.
If you buy a bond with a 6% coupon rate for $1,000, you’re earning $60 every year until it matures. Clear. Simple. Calculated.
How Do These Securities Work?
The basics? You buy a bond or security. The issuer agrees to pay you interest (called a coupon) on set dates. When the term ends (that’s the maturity date), you get your original investment back.
For example, in January 2023, Ontario issued a 10-year bond at 3.9%. If you bought $10,000 worth, you’d receive $390 annually until 2033. It’s kind of like getting paid for waiting.
The Role of Interest Rates and Maturity Dates
Interest rates and bond prices are like opposite ends of a seesaw. When rates go up, bond prices usually go down. That’s because new bonds pay more, making old ones less attractive.
And maturity? That’s your investment’s end date. Short-term bonds (1–3 years) are less sensitive to rate changes, while long-term ones (10+ years) swing harder.
Types of Fixed Income Securities
Government Bonds
In Canada, Treasury Bills (T-Bills) are short-term (under a year), and pay no interest but sell at a discount. For example, buy a T-Bill for $980 and get $1,000 at maturity.
Canada Savings Bonds, phased out in 2017, were replaced by market-traded equivalents. Meanwhile, U.S. Treasuries, like the 30-year bond, are global favorites—especially after 2022’s yield jump to 4.1%.
Municipal bonds? Cities like Vancouver or Toronto issue them to fund projects like subways or schools.
Corporate Bonds
When companies need cash, they issue bonds. In 2023, Rogers Communications issued a 7-year bond with a 5.15% coupon. Investors looking for higher returns (and more risk) often explore these.
“Investment grade” means safer bets. “High-yield” (a.k.a. junk bonds) offer juicier returns but higher risk—think of them as financial hot wings.
Certificates of Deposit (CDs)
Not just a U.S. thing. Some Canadian banks offer GICs (Guaranteed Investment Certificates), Canada’s CD equivalent. A 1-year GIC at 4.5% in 2024 gave you a safe return with deposit insurance.
Preferred Shares
These are hybrids—like a stock-bond smoothie. You get fixed dividends and have priority over common shares in case the company folds. Enbridge and BCE are known for their preferred share offerings.
Fixed Income Mutual Funds & ETFs
Don’t want to pick individual bonds? ETFs like BMO Aggregate Bond Index ETF or iShares Canadian Universe Bond Index let you buy a basket of bonds in one go.
Key Features and Terminology
· Face Value: The amount you’ll get back at maturity.
· Coupon Rate: Annual interest paid.
· Yield: What you earn based on what you paid.
· Duration: Sensitivity to rate changes.
· Credit Rating: Agencies like Moody’s or S&P give bonds a grade. AAA = rock solid. C = call your lawyer.
Taxes? In Canada, interest income is taxed as regular income—meaning higher than dividends or capital gains. Know before you buy.
Why Investors Love Fixed Income
· Stability: Stocks dropped 18% in 2022. Bonds? Many recovered by early 2024.
· Income: Retirees use them to create predictable cash flow. A $200,000 bond ladder paying 4% gives $8,000/year.
· Diversification: Mixing bonds with equities reduced portfolio losses by up to 30% during the 2020 COVID crash.
· Inflation-Protected Bonds: U.S. TIPS or Canadian Real Return Bonds adjust payouts with inflation—perfect when groceries cost more every month.
Real-World Use Cases and Examples
· Government of Canada Bonds: A staple in many retirement plans since the 1980s.
· Hedging with U.S. Treasuries: In 2023, investors shifted from NASDAQ stocks to U.S. 10-year bonds yielding 4.2%.
· Municipal Bonds: Alberta’s 2022 green bond raised $1.25 billion for renewable energy.
· Balanced Portfolio: A 60/40 stock-bond split with $40,000 in fixed income yielded $1,600 annually at 4%.
Risks You Shouldn’t Ignore
· Interest Rate Risk: 2022 rate hikes crushed long-term bond prices by 15%.
· Inflation Risk: A 3% bond in a 6% inflation world means your real return is negative.
· Credit Risk: In 2020, Hertz defaulted on its bonds. Investors got burned.
· Liquidity Risk: Thinly traded bonds might be tough to sell when needed.
Fixed Income vs. Everything Else
· Vs. Stocks: Lower returns, but steadier.
· Vs. Crypto: One’s a roller coaster, the other’s a comfy cruise.
· Vs. Real Estate: No property taxes, no tenants.
Who Should Consider Fixed Income?
· Risk-Averse Folks: If market swings make you sweat.
· Retirees: For consistent income without touching principal.
· Diversifiers: Add balance to equity-heavy portfolios.
· Institutions: Pension funds held over $700B in fixed income assets by 2024.
Where to Buy Fixed Income
· Online Brokers: Questrade, Wealthsimple, RBC Direct Investing.
· Direct from Government: Canada Savings Bonds (historically) or U.S. TreasuryDirect.
· Bond Funds & ETFs: Ideal for exposure without large capital.
Trends in 2023–2025
· Rising Yields: 10-year Canadian bonds hit 4.1% in Q4 2024.
· Green Bonds: Global issuance topped $700B in 2023.
· ESG Focus: More demand for bonds funding sustainable development.
· AI & Bonds: Robo-advisors now suggest fixed income for portfolio balancing.
How to Analyze and Choose Wisely
· Check Ratings: Avoid anything below BBB if you’re risk-averse.
· Look at Yield to Maturity: Tells you your real return if held till the end.
· Use Bond Ladders: Spread maturity dates for smoother cash flow and reinvestment.
Conclusion
Fixed income isn’t boring. It’s the calm in financial chaos. Whether you’re planning retirement or just want to sleep at night without checking stock tickers, fixed income delivers clarity, consistency, and control.
In a world of hype and hustle, sometimes steady wins the race.
And here’s the thing—while everyone’s busy chasing moonshots and meme stocks, fixed income quietly builds wealth in the background. It’s like that friend who never brags but somehow owns three properties by 40. Smart investors in 2025 are blending excitement with structure, and fixed income is the backbone holding it all together.
FAQs
1. Are fixed income securities really “risk-free”?
No, but government-issued ones come close. There’s always some level of risk.
2. Can I lose money in bonds?
Yes, especially if you sell before maturity or rates rise quickly.
3. What’s the minimum investment for fixed income?
Some ETFs allow you in with as little as $50.
4. How do rising interest rates affect my bonds?
Prices usually drop as new, higher-yielding bonds enter the market.
5. Are there fixed income options in crypto?
Yes—platforms like Aave offer interest-earning stablecoins, but they carry different risks.