Guaranteed Bill Index Deposit
Common to Australia, a guaranteed bill index deposit (GBID) is a type of term deposit where the income interest is directly linked to the daily money market index. This deposit is meant for investors who wish to attain money market return without actively managing market investments. GBID is usually a short-term deposit and offers guaranteed returns every quarter. On the maturity date, the interest is paid in arrears on a quarterly basis and may be immediately used or credited to a designated bank account.
The tenure of the deposit may vary depending on the choice of the investor. The investor will also bear the market risk, leading to positive or negative returns, depending on the market conditions. If the index is positive, it will lead to positive returns and if the index is negative, it will lead to negative returns. GBID deposits attract no management fees when they are held till the maturity date. Similar to a term deposit, the GBID deposit may not be redeemed prior to the maturity date. If the deposit is prematurely redeemed, adequate notice should be given and appropriate penalties may apply. As the name suggests, the deposit principal is usually guaranteed on maturity.