Negotiable Certificates of Deposit (NCDs) in Australia 2025: Guide & Trends

As Australian investors look for smarter, more flexible ways to grow their capital in 2025, Negotiable Certificates of Deposit (NCDs) are taking centre stage. Once the preserve of large institutions, NCDs are now more accessible and increasingly relevant for self-managed super funds (SMSFs), sophisticated investors, and even corporates seeking to park surplus cash. But what exactly are NCDs, and why are they gaining traction in the current economic climate?

What Are Negotiable Certificates of Deposit?

A Negotiable Certificate of Deposit (NCD) is a short-term debt instrument issued by banks, typically with maturities ranging from one month to one year. Unlike standard term deposits, NCDs are transferable and can be traded in the secondary market before maturity, offering investors greater liquidity. In Australia, NCDs are generally issued in large denominations (often $100,000 or more) and are a staple in the wholesale money market.

• Issuer: Primarily banks and authorised deposit-taking institutions (ADIs).
• Maturity: Common terms include 30, 90, 180, and 365 days.
• Denominations: Usually $100,000 or higher.
• Tradability: Can be bought and sold on the secondary market before maturity.
• Interest: Paid at maturity (discounted) or via periodic coupons.

Why Are NCDs Attracting Attention in 2025?

Several forces are driving a surge in NCD popularity among Australian investors this year:

• Rising Interest Rates: The RBA’s cautious rate hikes in late 2024 and early 2025 have led to higher yields on short-term money market instruments, including NCDs. Investors chasing better returns than standard savings accounts or term deposits are increasingly considering NCDs.
• Liquidity Needs: With ongoing market volatility, investors want the option to exit fixed-income positions quickly. NCDs’ tradability on the secondary market offers a key advantage over locked-in term deposits.
• Regulatory Changes: APRA’s 2025 updates to liquidity coverage ratio (LCR) rules for banks have boosted NCD issuance, providing investors with more product choice and potentially improved pricing.

For example, in Q1 2025, several major banks increased their NCD offerings, with three-month NCD rates quoted as high as 4.85%—often 0.5% above comparable term deposit rates. SMSFs and corporate treasurers are increasingly using NCDs as a strategic cash management tool, balancing the need for safety, liquidity, and enhanced yield.

Risks and Considerations: Is an NCD Right for You?

While NCDs can be attractive, they’re not for everyone. Here’s what investors need to weigh:

• Minimum Investment: The high denomination means NCDs are generally suitable for wholesale investors, not retail savers.
• Credit Risk: While issued by banks, NCDs are not covered by the Australian government’s Financial Claims Scheme (unlike retail term deposits). This means if the issuing bank fails, there’s no government guarantee.
• Market Risk: If you sell before maturity, the NCD’s price may be affected by interest rate movements or shifts in the issuer’s credit rating. Rising rates can mean selling at a loss.
• Access and Documentation: Investors typically access NCDs via brokers or institutional platforms, and documentation is more complex than retail banking products.

Despite these caveats, NCDs remain a core component of many institutional portfolios. In 2025, some brokers are trialling lower minimums and streamlined onboarding for sophisticated individual investors, making NCDs more accessible than ever.

How to Incorporate NCDs into Your Investment Strategy

For those who qualify, NCDs can provide a valuable balance between liquidity, return, and risk. Here’s how investors are using them in 2025:

• Cash Management: Corporates and SMSFs use rolling NCD ladders to manage cash flow and maximise yield without sacrificing access to funds.
• Portfolio Diversification: Adding NCDs alongside other fixed-income products can help smooth returns in volatile markets.
• Tactical Yield Plays: In periods of rate volatility, some investors buy NCDs with the intention of trading them for capital gains if rates fall.

Major Australian brokers and money market platforms now offer real-time NCD pricing, secondary market liquidity, and transparent settlement processes, making it easier to trade and manage these instruments.

The Bottom Line

Negotiable Certificates of Deposit are no longer just a tool for big banks and institutions. As 2025 unfolds, NCDs are carving out a niche for investors who demand flexibility, competitive returns, and the ability to adapt to fast-moving markets. While not risk-free, for those who understand their mechanics, NCDs can be a powerful addition to the Australian investment toolkit.