What would you like to achieve by investing in bonds? Save money and get additional income? Saving for an important goal? Or maybe you dream about how to gain financial freedom with the help of these investments? Whatever your goal, it's worth understanding how much income your bonds generate and being able to differentiate good investment from bad. There are several principles for assessing income, knowledge of which will help with this.

What types of income do bonds have?

The yield of a bond is the percentage income received by an investor from investing in a debt security. Interest income on them is generated from two sources. On the one hand, fixed coupon bonds, like deposits, have an interest rate that is charged on the face value. On the other hand, bonds, like stocks, have a price that can change depending on market factors and the situation in the company. True, changes in the price of bonds are less significant than those of stocks.

The total yield of a bond includes the coupon yield and takes into account the purchase price. In practice, different profitability estimates are used for different purposes. Some of them show only the yield from the coupon, others additionally take into account the purchase and sale price, and others show the return on investment depending on the holding period - before sale on the market or before redemption by the issuer that issued the bond.

To make the right investment decisions, you need to understand what types of bond yields there are and what they show. There are three types of returns, the management of which turns an ordinary investor into a successful rentier. These are the current yield on interest on coupons, the yield on sale and the yield on securities to maturity.

What does the coupon rate indicate?

Coupon rate is the base percentage of the bond's face value, also called coupon yield. The issuer announces this rate in advance and pays it periodically fixed time. The coupon period of most Russian bonds is six months or a quarter. Important nuance is that the coupon yield on the bond is accrued daily, and the investor will not lose it even if he sells the paper ahead of schedule.

If a bond purchase and sale transaction occurs within the coupon period, then the buyer pays the seller the amount of interest accumulated since the date of the last coupon payment. The amount of this interest is called the accumulated coupon income (ACY) and is added to the current market price of the bond. At the end of the coupon period, the buyer will receive the coupon in its entirety and thus compensate for its expenses associated with the compensation of the accrued income to the previous owner of the bond.

Exchange quotes for bonds from many brokers show the so-called net price of the bond, excluding the accrued income. However, when an investor orders a purchase, the NCD will be added to the net price, and the bond may suddenly be worth more than expected.

When comparing bond quotes in trading systems, online stores and applications of different brokers, find out what price they indicate: net or with accrued income. After this, estimate the final costs of the purchase in one or another brokerage company, taking into account all costs, and find out how much money will be debited from your account if you purchase securities.

Coupon yield

As the accumulated coupon yield (ACY) increases, the value of the bond increases. After the coupon is paid, the cost is reduced by the amount of the NKD.

NKD - accumulated coupon income
C (coupon) - amount of coupon payments for the year, in rubles
t (time) - number of days from the beginning of the coupon period

Example: an investor bought a bond with a par value of 1000 rubles with a semi-annual coupon rate of 8% per year, which means a payment of 80 rubles per year, the transaction took place on the 90th day of the coupon period. His additional payment to the previous owner: NKD = 80 * 90 / 365 = 19.7 ₽

Is the coupon yield the investor's interest?

Not really. Each coupon period, the investor receives a certain amount of interest in relation to the face value of the bond to the account that he specified when concluding an agreement with the broker. However, the real interest that the investor receives on the invested funds depends on the purchase price of the bond.

If the purchase price was higher or lower than par, the yield will differ from base rate coupon set by the issuer in relation to the par value of the bond. The easiest way to evaluate real income from an investment - correlate the coupon rate with the purchase price of the bond using the current yield formula.

From the presented calculations using this formula, it can be seen that profitability and price are related to each other by inverse proportionality. An investor receives a lower yield to maturity than the coupon when he purchases a bond at a price higher than its face value.

C.Y.
C g (coupon) - coupon payments for the year, in rubles
P (price) - bond purchase price

Example: an investor bought a bond with a par value of 1000 rubles at a net price of 1050 rubles or 105% of the par value and a coupon rate of 8%, that is, 80 rubles per year. Current yield: CY = (80 / 1050) * 100% = 7.6% per annum.

Yields fell - prices rose. I'm not kidding?

This is true. However, for novice investors who do not clearly understand the difference between yield to sale and yield to maturity, this is often a difficult point. If we consider bonds as a portfolio of investment assets, then its profitability for sale in the event of a rise in price, like that of stocks, will, of course, increase. But the bond yield to maturity will change differently.

The thing is that a bond is a debt obligation, which can be compared with a deposit. In both cases, when purchasing a bond or placing money on deposit, the investor actually acquires the right to a stream of payments with a certain yield to maturity.

As you know, interest rates on deposits rise for new depositors when money depreciates due to inflation. Also, the yield to maturity of a bond always rises when its price falls. The opposite is also true: the yield to maturity falls when the price rises.

Beginners who evaluate the benefits of bonds based on comparisons with stocks may come to another erroneous conclusion. For example: when the price of a bond has increased, say, to 105% and has become more than the face value, then it is not profitable to buy it, because when the principal is repaid, only 100% will be returned.

In fact, it is not the price that is important, but the bond's yield - the key parameter for assessing its attractiveness. Market participants, when bidding for a bond, agree only on its yield. The bond price is a derivative of the yield. In effect, it adjusts the fixed coupon rate to the rate of return that the buyer and seller have agreed upon.

See how the yield and price of a bond are related in the video of the Khan Academy, an educational project created with money from Google and the Bill and Melinda Gates Foundation.

What will be the yield when selling the bond?

The current yield shows the ratio of coupon payments to the market price of the bond. This indicator does not take into account the investor's income from changes in its price upon redemption or sale. To evaluate financial results, you need to calculate a simple yield, which includes a discount or premium to the face value when purchasing:

Y (yield) - simple yield to maturity/put
CY (current yield) - current yield, from coupon
N
P (price) - purchase price
t (time) - time from purchase to redemption/sale
365/t - multiplier for converting price changes into annual percentages.

Example 1: an investor purchased a two-year bond with a par value of 1000 rubles at a price of 1050 rubles with a coupon rate of 8% per annum and a current coupon yield of 7.6%. Simple yield to maturity: Y 1 = 7.6% + ((1000-1050)/1050) * 365/730 *100% = 5.2% per annum

Example 2: the issuer’s rating was increased 90 days after purchasing the bond, after which the price of the security rose to 1,070 rubles, so the investor decided to sell it. In the formula, let's replace the par value of the bond with its sale price, and the maturity date with the holding period. We get a simple return on sale: Y 2 7.6% + ((1070-1050)/1050) * 365/90 * 100% = 15.3% per annum

Example 3: The buyer of a bond sold by a previous investor paid 1,070 rubles for it - more than it cost 90 days ago. Since the price of the bond has increased, the simple yield to maturity for the new investor will no longer be 5.2%, but less: Y 3 = 7.5% + ((1000-1070)/1070) * 365/640 * 100% = 3 .7% per annum

In our example, the bond price increased by 1.9% over 90 days. In terms of annual yield, this already amounted to a serious increase in interest payments on the coupon - 7.72% per annum. With a relatively small change in price, bonds over a short period of time may show sudden jump profit for the investor.

After selling the bond, the investor may not receive the same 1.9% return for every three months within a year. However, the annualized return is important indicator, characterizing the investor’s current cash flow. With its help, you can make a decision on early sale of a bond.

Let's consider the opposite situation: as yields rise, the price of the bond decreases slightly. In this case, the investor may receive a loss upon early sale. However, the current yield from coupon payments, as can be seen in the above formula, will most likely cover this loss, and then the investor will still be in the black.

The lowest risk of losing invested funds during early sale are bonds of reliable companies with a short period until maturity or redemption under an offer. Strong fluctuations in them can be observed, as a rule, only during periods economic crisis. However, their market value recovers quite quickly as the economic situation improves or the maturity date approaches.

Transactions with more reliable bonds mean less risk for the investor, but the yield to maturity or put on them will be lower. This general rule the relationship between risk and return, which also applies to the purchase and sale of bonds.

How to get the maximum benefit from a sale?

So, as the price rises, the bond's yield falls. Therefore, to get the maximum benefit from price increases when selling early, you need to choose bonds whose yields are likely to decline the most. Such dynamics are usually shown by securities of issuers that have the potential to improve their financial situation and improving credit ratings.

Bonds with long maturities can also show large changes in yield and price. In other words, long bonds are more volatile. The thing is that long bonds generate a larger cash flow for investors, which has a greater impact on price changes. It is easiest to illustrate how this happens using the same deposits as an example.

Let's assume that a year ago a depositor placed money on a deposit at a rate of 10% per annum for three years. And now the bank accepts money for new deposits at 8%. If our depositor could assign the deposit, like a bond, to another investor, then the buyer would have to pay the difference of 2% for each remaining year of the deposit agreement. The surcharge in this case would be 2 g * 2% = 4% on top of monetary amount in the contribution. For a bond purchased under the same conditions, the price would increase to approximately 104% of the par value. The longer the term, the higher the additional payment for the bond.

Thus, an investor will receive more profit from selling bonds if he chooses long bonds with a fixed coupon when rates in the economy decline. If interest rates, on the contrary, rise, then holding long bonds becomes unprofitable. In this case, it is better to pay attention to securities with a fixed coupon that have short term to maturity, or floating rate bonds.

What is the effective yield to maturity?

The effective yield to maturity is the investor's total income from investments in bonds, taking into account the reinvestment of coupons at the rate of the initial investment. To estimate the full yield to maturity of a bond or its redemption under an offer, use the standard investment indicator- internal rate of return on cash flow. It shows the average annual return on investment, taking into account payments to the investor over different periods of time. In other words, this is the return on investment in bonds.

You can independently calculate the estimated effective profitability using a simplified formula. The calculation error will be tenths of a percent. The exact yield will be slightly higher if the purchase price exceeded the par value, and slightly less if it was below the par value.

YTM op (Yield to maturity) - yield to maturity, approximate
C g (coupon) - the amount of coupon payments for the year, in rubles
P (price) - current market price of the bond
N (nominal) - bond face value
t (time) - years to maturity

Example 1: an investor purchased a two-year bond with a par value of 1000 at a price of 1050 rubles with a coupon rate of 8% per annum. Estimated effective yield to maturity: YTM 1 = ((1000 – 1050)/(730/365) + 80) / (1000 + 1050) / 2 * 100% = 5.4% per annum

Example 2: the issuer’s rating was increased 90 days after purchasing the bond, and its price increased to 1,070 rubles, after which the investor decided to sell the bond. In the formula, let's replace the par value of the bond with its sale price, and the maturity date with the holding period. Let's get the approximate effective yield for sale (horizon yield): HY 2 = ((1070 – 1050)/(90/365) + 80) / (1000 + 1050) / 2 * 100% = 15.7% per annum

Example 3: The buyer of a bond sold by a previous investor paid 1,070 rubles for it - more than it cost 90 days ago. Since the price of the bond has increased, the effective yield to maturity for the new investor will no longer be 5.4%, but less: YTM 3 = ((1000 – 1070)/(640/365) + 80) / (1000 + 1050) / 2 * 100% = 3.9% per annum

The easiest way to find out the effective yield to maturity on a specific bond is to use a bond calculator on the website Rusbonds.ru. An accurate calculation of the effective return can also be obtained using a financial calculator or the Excel program through the special function “internal rate of return" and its variations (XIRR). These calculators will calculate the effective rate of return using the formula below. It is calculated approximately using the method of automatic selection of numbers.

How to find out the yield of a bond, watch the video High school Economics with Professor Nikolai Berzon.

The most important!

✔ The key parameter of a bond is its yield, the price is a derived parameter from the yield.

✔ When a bond's yield falls, its price rises. And vice versa: when yields rise, the price of the bond falls.

✔ You can compare comparable things. For example, the net price excluding accrued income is with the net price of the bond, and the full price with accrual income is with the full price. This comparison will help you make a decision when choosing a broker.

✔ Short one- and two-year bonds are more stable and less dependent on market fluctuations: investors can wait for the maturity date or repurchase by the issuer under an offer.

✔ Long bonds with a fixed coupon allow you to earn more by selling them when rates in the economy drop.

✔ A successful rentier can receive three types of income from bonds: from coupon payments, from changes in the market price upon sale, or from reimbursement of the face value upon redemption.

An intelligible dictionary of terms and definitions of the bond market. A reference base for Russian investors, depositors and rentiers.

Bond discount is a discount to the face value of the bond. A bond whose price is below par is said to be selling at a discount. This occurs if the seller and buyer of the bond have agreed on a higher rate of return than the coupon set by the issuer.

The coupon yield of a bond is the rate annual interest, which the issuer pays for the use of borrowed funds raised from investors through the issue of securities. Coupon income is accrued daily and calculated at a rate based on the face value of the bond. The coupon rate can be constant, fixed or floating.

The coupon period of a bond is the period of time after which investors receive interest accrued on the face value of the security. The coupon period of most Russian bonds is a quarter or six months, less often - a month or a year.

Bond premium is an increase to the face value of the bond. A bond whose price is higher than its face value is said to sell at a premium. This occurs if the seller and buyer of the bond have agreed on a lower rate of return than the coupon set by the issuer.

Simple yield to maturity/put - is calculated as the sum of the current yield from the coupon and the yield from the discount or premium to the face value of the bond, as a percentage per annum. Simple yield shows an investor the return on an investment without reinvesting coupons.

Simple yield to sale - calculated as the sum of the current yield from the coupon and the yield from the discount or premium to the sale price of the bond, as a percentage per annum. Since this yield depends on the price of the bond at sale, it can differ greatly from the yield to maturity.

Current coupon yield is calculated by dividing the annual cash flow from coupons by the market price of the bond. If you use the purchase price of the bond, the resulting figure will show the investor the annual return on his cash flow from coupons on the investment.

The total price of the bond is the sum of the market price of the bond as a percentage of the face value and the accumulated coupon income (ACI). This is the price an investor will pay when purchasing the paper. The investor compensates for the costs of paying the NKD at the end of the coupon period, when he receives the coupon in full.

The bond's net price is the market price of the bond as a percentage of the face value, excluding the accumulated coupon income. This is the price the investor sees in trading terminal, it is used to calculate the return received by an investor on invested funds.

Effective yield to redemption/put - the average annual yield on the initial investment in bonds, taking into account all payments to the investor over different periods of time, redemption of the par value and income from reinvestment of coupons at the rate of the initial investment. To calculate profitability, the investment formula for the rate of internal return on cash flow is used.

Effective yield on sale - the average annual return on the initial investment in bonds, taking into account all payments to the investor over different periods of time, proceeds from the sale and income from the reinvestment of coupons at the rate of the initial investment. The effective yield on sale shows the return on investment in bonds for a certain period.

A person can live for a long time on money,
which he is waiting for.
William Faulkner, American writer

It is more convenient and easier to take into account your assets and return on investments in a specialized program. I use Family 10.

Bonds are a good conservative instrument along with bank deposits. But it’s easy to compare deposits with each other; we set the terms and amounts and look at the interest rate. Where there is more, it is more profitable. The frequency of capitalization and interest payments practically does not change the picture.

When we start looking closer at bonds, many new words and terms arise that refer to the properties of a bond that affect its yield. NKD, YTM, coupon, discount, offer, duration... In this article we will not touch upon assessing the reliability of the issuer. We will compare bonds solely by yield.

So, the first thing a bond investor faces is the coupon yield. Coupon income is a periodic payment to bondholders. There are bonds with a fixed coupon rate and with a floating one. Fixed rate

means that coupon payments are a certain percentage of the bond's face value and do not change during the life of the bond. The floating rate changes due to external circumstances. For example, it may be “tied” to the Central Bank refinancing rate. The coupon yield is obtained by dividing the coupon payments by the purchase price of the bond. If you bought a bond at par for 1000 rubles with a coupon rate of 10%, then you will receive this 10% per year. In two years you will receive 20%, etc. depending on the term of the bond. Please note that

compound interest

no coupon payments.

Go ahead. Coupons are paid on a certain date to bondholders.

It’s like this: if you own a bond on the payment day, you get a coupon; if you don’t own it, you get nothing. But the bond market is more “fair”. If I held a bond for a full year and sold it to you on December 1st so that you would receive the coupon on December 31st, then I want compensation for the time I held the bond and forfeited the coupon. In the stock market, this issue is decided by supply and demand - there dividends make up a small part of investor income, and they happen once a year, and not always.

In bonds, coupon payments are the main source of income for investors, and coupons are usually paid several times a year. Therefore, compensation to bondholders is made automatic. When you buy a bond from me on December 1, you must pay not only its price, but also the accumulated coupon income (ACI). Accumulated coupon income (ACI) is that part of the coupon income that has been accrued but not yet paid to bondholders.

Example: coupon income is paid on December 31st, you buy a bond on December 1st. You do not have the right to receive the entire coupon income for the year, because for 11 months the security did not belong to you. You must pay an amount equal to the coupon income for the period from January to October to the previous bond holder.

In general, the purchase price of a bond is equal to the bond's quotation on the stock exchange plus the NKD. The income tax depends on the coupon rate, the frequency of coupon payments and the dates of these payments. The NCD changes every day and is indicated next to the quotes of a particular security.

That's it for your expenses. Let's move on to income. First, the bond can be held until maturity.

The advantage of this is that you know exactly how much you can expect, since the issuer repays the bonds at par. Secondly, you can accept the offer, that is, the issuer's offer to redeem the bonds early. The redemption price is set by the issuer and may differ from the face value. Thirdly, you can sell the bond on the stock exchange at current quotes. Using the last two methods, it is difficult to predict profitability - no one knows what bond quotes will be in the future, at what price the issuer will make an offer... But price fluctuations on the bond market are significantly lower than fluctuations in stock quotes. Quotes “spin” around the face value. In the bond market, quotes are usually indicated not in money, but as a percentage of the face value. And you can immediately see which securities are sold at a discount and which with a premium. bonds, the Yield to Maturity (YTM) indicator is used. YTM shows the internal rate of return as a percentage per annum. We will not go into the jungle of definition through discounting. Consider it the return on investment in bonds as a percentage per annum. This rate can be compared not only with the rates of other bonds, but also with alternative ways

investing. YTM is calculated on a specific date. This rate takes into account your purchase costs (quote + NKD) and your future earnings if you hold the bond to maturity. Yield to maturity takes into account “dirty” cash flows

, that is, excluding commissions and taxes. So in reality you will get less profit.

The yield to maturity indicator most often overestimates the real yield, since its calculation makes the assumption that all coupon payments will be reinvested in the same bonds. In practice, this is not always possible. If you are the owner of one bond with a par value of 1000 rubles and received a coupon in the amount of 100 rubles, no one will give you one-tenth of the bond with this money - these are not mutual fund shares for you.

You can calculate the yield to maturity yourself: for example, in Excel, using the NET INN function. As arguments, you need to indicate the dates and amounts of your expenses and income. But usually the YTM indicator is published along with the quotes. For example, . Please note that for some bonds the “yield to offer” indicator has been calculated - this means that the offer has been announced and the redemption price is known. Some bonds lack both yield to maturity and yield to put. This indicates a floating coupon rate. Since coupon rates are unknown, it is impossible to calculate the yield.

Example of calculating bond yield

Let's take a bond with a not very long maturity. For example, . The bonds were issued in 2005, coupon payments - once every six months, par value 1000 rubles, maturity date 05/26/2015. The coupon rate is 8.5%.

To estimate future income, look at the “Payments” tab; the dates of coupon payments and the payments themselves are indicated there in percentages and in rubles. The coupon rate is 8.5%, payments are made twice a year, which means each must be 4.25% of the face value. The selected bond has payments in unequal proportions (4.285% and 4.215%). We write down the dates of future payments and their amounts in rubles in Excel. Don't forget about redemption, which usually occurs on the date of the last coupon. We add the first row to the resulting table, in which we indicate today’s date (April 19, 2012) and the investor’s expenses for purchasing the bond. We indicate expenses with a minus.

We use the NET INDOH function in Excel and get 10.278%. This is more than the coupon rate due to the large discount. A large discount is most often associated with an increased risk of default. You can decide whether to accept it or not after carefully checking the issuer. By the way, YTM could not be counted, but looked at on the “Trading Results” tab. As of April 19, the figure there is 10.278, which is exactly what we got in our calculations.

YTM can be used to evaluate alternative investments.

If you have an alternative with a yield of more than 10.278% per annum, then it is better to refuse to lend to Detsky Mir, and vice versa: if your alternative has a lower yield, then invest in bonds. Important: alternatives must be approximately the same level of risk.

It’s pointless to compare YTM and the MICEX index, but with bank deposits it’s just right.

Successful investments to you! Flickr / Karen Eliot, cc-by Most often, private investors working in the bond market use the most simple strategy: They purchase bonds and hold them until maturity. More complex

investment strategies

they are used quite rarely in the debt instruments market, although their profitability potential is much higher One of the most popular securities market instruments among conservative and moderately conservative investors are bonds. Bonds have a number of significant advantages compared to others

financial instruments

(in particular, shares), which include: 1) a high level of profitability compared to bank deposits (with the maturity of bonds comparable to the term of a bank deposit); 2) receiving regular income (on coupon bonds traded on the Russian

stock market financial indicators do not have a fundamental impact on the level of solvency of the issuer).

Most often, private investors working in the bond market use the simplest strategy: they purchase bonds and hold them until maturity. They rarely use more complex investment strategies in the debt instruments market, although their profitability potential is much higher.

A very interesting strategy for working in the bond market is the use of offers for bond issues.

In world practice, there are two main types of offers, which can be conditionally called the “issuer’s offer” (the redemption of bonds occurs at the initiative of the bond issuer) and the “investor’s offer” (the initiator of the redemption of securities is the investor).

In our country, “issuer offers” are practically not used: as a rule, bonds are repurchased at the initiative of the bondholder. In this case, the offer for the investor is the opportunity to demand that the issuer repurchase bonds at a predetermined price within a predetermined period.

It is worth paying attention to the fact that the investor has a real choice: he can either take advantage of the offer or leave the bonds in his investment portfolio. In addition, he can present for redemption all the bonds he owns or only part of the securities.

The key parameters of the offer (offer date, bond redemption price, list and deadlines for submitting documents, etc.) are determined during the issue process and cannot be changed in the future. The owner of the bonds can find information about the terms of the offer in the issuance documents - the decision on the issue of bonds or the prospectus for the issue of securities ( electronic versions These documents are available on the website of the bond issuer or on specialized resources, in particular, www.cbonds.ru or www.rusbonds.ru).

When trading independently on the stock exchange, the offer procedure, in contrast to the payment of coupons and the redemption of the par value of bonds, requires that the investor must take certain actions.

First, the investor pre-blocks the securities and receives an extract from the depository confirming this transaction.

Secondly, he fills out a request for redemption of bonds (sometimes notarization of this document is required) and sends it by mail along with an extract from the depository to the issuer or his authorized representative.

Third, on the offer date, the investor (through his broker) places an order to sell the bonds at the offer price.

At trust management all necessary actions in order to present bonds for offer on behalf of the investor can be performed by the trustee.

In any case, the cost of presenting bonds for offer will be from 500 to 2000 and will take about 2-4 days, so the use of this strategy is justified if there is sufficient large amounts investments (from 1 million rubles and more).

The use of offers for bond issues gives investors the opportunity to “get into the money” and use new investment opportunities opening on the stock and bond markets.

If an investor prefers to work primarily in the bond market, then inclusion in the portfolio of bonds for which an offer is provided allows for a quick response to changes in the level of interest rates on money market. The fact is that there is an inverse relationship between the level of interest rates and bond prices (when interest rates rise, bond prices fall, and vice versa). When forming an investment portfolio, a private investor cannot absolutely accurately predict the future level of interest rates, but he has a real opportunity to quickly revise the structure of his investment portfolio taking into account market realities.

Let's assume that an investor purchased a bond with maturity in 2 years, and it has an offer in 1 year (at a price equal to 100% of the par value of the paper). At the time of purchase, the bond's yield to put was 12% per annum.

If in a year (by the time of the offer) interest rates rise (and bond prices, accordingly, decrease), then the investor can submit the bonds for offer and use the freed-up funds to buy debt instruments with a higher yield.

If interest rates remain at the same level or if they fall (in the first case, bond prices will remain unchanged, and in the second they will increase), the investor will not take advantage of the offer and will own the bond until maturity.

An investor who follows a moderate strategy and distributes his funds between stocks and bonds can act in a similar way, but in this case the decision to implement the offer will be made by him depending on the situation on the stock market. When the stock market declines, the investor will submit securities for offer and gradually increase the share of shares in the portfolio, and if the stock market dynamics are positive, the share of bonds in the portfolio will increase (in this case, the investor most likely will not present bonds for offer).

An investment strategy that involves the active use of bond offers certainly has its pros and cons.

The main advantage of this strategy is the low level of risk that the investor assumes, especially if he prefers to work with medium-term bonds, and the high level of predictability of investment results.

The second significant “plus” is the ability to quickly respond to changes in market conditions, including by including bonds with different offer periods in the portfolio.

Another advantage of this strategy is low trading activity and, accordingly, low time costs required to implement this strategy. Private investor can form a bond portfolio in such a way as to be able to present bonds for offer at a certain frequency (for example, once a quarter).

Among the shortcomings of the strategy, it is necessary to note its relative labor intensity (regardless of the number of bonds submitted for the offer, the investor’s procedure remains practically unchanged) and the need to timely provide documents to the issuer or paying agent and submit an application for the sale of bonds (for example, if the investor violates the deadline for submitting documents, the issuer has the right not to fulfill the offer).

The bond offer date is

When working with bonds, one of the key indicators What the investor is interested in is profitability. At the same time, in some securities you can see two types of yield: to maturity and to offer. If everything is clear with the first indicator, then the second raises many questions among novice investors.

To understand this issue, you first need to understand what an offer on a bond means, why it is needed, and what advantages and disadvantages it has for the investor.

What is a bond offer?

A bond offer is certain conditions under which an agreement will be concluded between the issuer and the security holder. The terms stipulate when and how the issuer can pay off its obligations early. security. That is, the presence of such a parameter means that the issuing company can pay the holder before the expiration date of the document.

Review or Call. In this case, at the specified time, the issuer has the right to close all its obligations to investors and pay the nominal amount in full. The owner of the paper is obliged to provide his papers for sale.

Irrevocable bond offer or put offer. In such a situation, at the appointed time, the owner of the asset can receive the full face value from the issuer. In this case, the issuing company is obliged to buy back the assets and has no right to refuse. The investor may or may not take advantage of the opportunity to sell his asset.

It becomes clear that the bond offer has certain advantages and disadvantages for each party. In the first case, the issuing company can pay investors early and not pay interest in the future, and in the second, the investor receives an advantage and can receive their money early.

To balance the advantages and disadvantages for each party, such securities have other conditions. For example, Call assets often have a bonus in the form of increased yield, while in Put the coupon rate can change over time.

Yield to bond offer

Since there is an offer to repurchase bonds, it is impossible to calculate the full return on such investments. That is why such a term as profitability is applied to the offer. This indicator can change in each period.

For a bond, the offer date usually coincides with the interest payment date on the coupon. The investor knows about this date in advance and is able to easily calculate profitability indicators. Fortunately, you never have to do the calculations yourself, since on all exchanges the calculations occur automatically and the person sees the result immediately on the screen.

Call papers are very rare on the Moscow exchange and many investors almost never come across them. But the irrevocable option is quite popular. In this case, the coupon on the security is set only until a certain period, and in the following periods the issuer sets the interest in accordance with the current market yield.