Glossary · Rates & Instruments
Fixed Income
Securities that pay a fixed return over a defined period, such as bonds or government securities. Generally considered lower risk than equities.
01—What is Fixed Income?
The definition — and what it means in practice.
Fixed income refers to securities that pay a pre-agreed return over a defined period. The return is usually set as an interest or profit rate (a “coupon”) and a stated maturity date when principal is repaid. Common examples include bonds and government securities. Because cashflows are more predictable than ordinary shares, fixed income is generally considered lower risk than equities, though it can still carry price and credit risk.
Fixed income matters because it can stabilise a portfolio and support predictable cash needs, such as monthly expenses or a future lump-sum payment. Investors typically compare instruments by their issuer quality, maturity, and yield, and by how prices may change when market interest rates move. Even when you plan to hold to maturity, liquidity and reinvestment risk (what rate you can earn next) can affect outcomes.
If you buy a Rs 1,000 bond paying Rs 100 a year for 3 years, you expect the Rs 100 payments plus your Rs 1,000 back at maturity.
- Fixed income pays defined cashflows (coupon/profit) and typically returns principal at maturity.
- Generally lower risk than equities, but still exposed to interest-rate, credit, and liquidity risk.
- Longer maturities usually mean greater price sensitivity when interest rates change.
- “Government securities” are a major fixed income category, alongside corporate issues.
- Yield and maturity help compare instruments with different prices and payment schedules.
02—How fixed income works on the PSX
The Pakistan-specific rules, conventions, and numbers.
A PSX investor often encounters fixed income as an alternative to listed shares when they want more predictable cashflows than dividends. Fixed income is commonly discussed alongside government securities and bonds, with returns typically quoted as yields. Unlike equities, where prices can move within daily circuit breakers for most shares, fixed income pricing is usually analysed through how yields respond to interest-rate expectations.
In Pakistan, short- and long-tenor government instruments are widely referenced, including Treasury Bills (3, 6, and 12 months) and Pakistan Investment Bonds (3 to 30 years). Market interest-rate benchmarks such as KIBOR (published under State Bank of Pakistan oversight) can influence how investors think about yields and reinvestment opportunities, even when they access fixed income indirectly through portfolios or products.
03—Common misconceptions
Where investors most often get this wrong.
Fixed income means the price never changes.
Prices can rise or fall as market yields move, especially for longer-maturity instruments. The cashflows may be fixed, but the market value is not.
Fixed income is risk-free.
Even high-quality issuers carry risks such as inflation eroding purchasing power, liquidity constraints, and the chance that future reinvestment rates are lower.
A higher yield always means a better deal.
Higher yield often compensates for higher risk, such as longer maturity, lower credit quality, or lower liquidity. Comparing like-for-like terms is essential.
04—Using fixed income on BSL
Where this term shows up across the platform — with live data.
- Compare listed shares against fixed-income style alternatives by monitoring overall market conditions on Market.
- Review equity sectors when balancing risk versus fixed income in your asset allocation using Sectors.
- Screen for steadier, income-oriented equities as a complement to fixed income with the Stock Screener.
- Learn related concepts like bonds and yields in the Glossary.
05—Frequently asked questions
What investors ask about fixed income on the PSX.
Frequently Asked Questions
Fixed income is a category of securities designed to pay predefined cashflows over a set period, such as bonds and government securities. Investors typically use them for more predictable income and lower volatility than equities, while still recognising interest-rate, credit, and liquidity risks.
Fixed income is generally considered lower risk than equities because payments are defined and usually senior to equity in a company’s capital structure. However, it is not automatically “safe”: market prices can move with interest rates and credit risk can still exist.
When market interest rates rise, existing fixed-coupon securities typically fall in price because newer issues may offer higher yields. When rates fall, existing fixed-coupon securities can rise in price. The effect is usually stronger for longer maturities.
Commonly referenced government instruments include Treasury Bills with 3, 6, and 12-month tenors and Pakistan Investment Bonds with maturities ranging from 3 to 30 years. These are often discussed as benchmarks for yields across the market.
A typical fixed income instrument is structured to repay principal at maturity, but repayment depends on the issuer meeting its obligations. Government securities are generally viewed as high quality, while corporate issuers can carry greater default risk.
06—Related terms
Keep building the picture.
A fixed-income instrument representing a loan made by an investor to a borrower, typically a government or corporation. The borrower pays periodic interest and repays the principal at maturity.
Debt instruments issued by the Government of Pakistan to finance public expenditure. Include Treasury Bills (T-Bills) and Pakistan Investment Bonds (PIBs).
A short-term government debt instrument issued by the Government of Pakistan, with maturities of 3, 6, or 12 months. Sold at a discount to face value, with the return being the difference between the purchase price and the amount received at maturity. Considered one of the safest investments in Pakistan.
A long-term government debt instrument issued by the Government of Pakistan, with maturities ranging from 3 to 30 years. Pays a fixed coupon rate on a semi-annual basis and is sold through primary dealers via auctions announced by the SBP.
The income generated by an investment over a period, expressed as a percentage of the investment's cost or current market value. Dividend yield and bond yield are the most commonly referenced forms.
The cost of borrowing money, set by the State Bank of Pakistan through the policy rate. Rising interest rates generally weigh on equity valuations by increasing the discount rate applied to future earnings.
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