Circulation of corporate bonds. Corporate bonds of Russian issuers. For those who read a lot and count well

15.11.16 140 026 0

For those who read a lot and count well

The card shows that Tinkoff BO-7 is an issue of ruble bonds with a par value of 1000 rubles with a semi-annual coupon. That is, you can give Tinkoff Bank money in amounts that are multiples of 1,000 rubles, and the bank will pay off debts every six months.

The rate of the first three coupons is set at 11.7% per annum, or 58.34 rubles. That is, for every 1000 rubles, Tinkoff Bank will pay you 58.34 rubles every six months.

The bonds will be repaid in June 2021. However, at the end of the third coupon period, which ends on December 28, 2017, there is an option for early redemption if you so choose. On the card, the opportunity is indicated by the word put in the line of the third coupon. Here's how it's formulated in the documentation:

“The issuer will be obliged to purchase exchange-traded bonds according to the demands of their owners, stated during the last five working days of the third coupon period.”

The possibility of early repayment is called an offer or put option.

Thanks to the offer, the five-year graduation becomes a two-year one. That is, holders of Tinkoff BO-7 bonds can receive their money not in 2021, but already in 2017, if they want.

Before the offer begins, the bank will announce the rate for the next coupons. If the rate is attractive, then the bonds may not be redeemed, but will continue to be held.

What is an offer or put option?

Many Russian corporate bonds have put options. This means that at a certain period the bondholder has the right to present the bonds for redemption at par. That is, to return ahead of schedule the money that he seemed to have lent.

Most often, the issuer grants this right when the coupon rate is not determined for all coupon periods. As in the case of Tinkoff Bank: for the first three coupons it guarantees a rate of 11.7% per annum, and we’ll see what happens next in a year and a half.

When the issuer announces a new batch of rates, they may turn out to be unprofitable for the holder. In such a case, the holder must have the opportunity to exit the game. That's what offers are for.

There are issues for which all coupons are known, but offers are still provided. This is done to reduce the risks of bondholders and thus make the bonds more attractive. The risk is reduced because if the rate drops below the market rate, holders will be able to present the bonds for redemption.

How you pay off your put bonds depends on your broker. For some, the procedure costs about 1000 rubles, but the broker does everything for you. For others, the procedure is free, but you need to notify the issuer yourself that your bonds need to be redeemed. Then, on the appointed day, in a special window in the exchange terminal, make a transaction with a special agent.

In addition to the broker's commission, there may also be a commission from the depositary - the company that sort of stores your securities. The amount of such a commission cannot always be known in advance, but it is comparable to the price of presentation for redemption through a broker.

Profitability

For a private investor, the yield on bonds on the exchange will never be equal to the coupon yield. The fact is that the market rate is constantly changing, and the price of bonds changes after them. I talked about the effect of price on profitability

You can find out the current price and profitability on the stock exchange. To do this, we look at the prices and yields of previous transactions or existing orders. Roughly speaking, on what terms are bonds currently traded in fact, and not on paper?

In my QUIK exchange terminal there is a table with the twenty best orders to buy and sell. Red lines - sell, green - buy:

In the picture, the price of the best offer for sale is 100.80%. The yield calculated by the exchange at this price is 11.21%. This means that buying and holding these bonds until maturity on the offer will bring 11.21% per annum.

Bond yield calculated by the exchange

In the article “”, for simplicity of presentation, I calculated the so-called simple profitability. By analogy with a deposit, this is the return on the deposit without interest capitalization.

But the Moscow Exchange calculates the so-called effective profitability. The effective yield is the yield taking into account the reinvestment of coupons at the same rate at which the initial investment was made. Continuing the analogy with the deposit, this is a deposit with interest capitalization. The profitability with capitalization is higher.

The calculation of effective yield is based on a number of assumptions. For example, that you will be able to reinvest coupons at the same rate. In practice, this is not always feasible: the rate may change, and your coupon payments with a small package may not be a multiple of the price of the bonds to purchase.

Also, the effective yield is considered relative to the price offered on the exchange, and not the nominal one. If you remember, Tinkoff Bank bonds had a yield of 11.7% when issued, and now we see a yield of 11.21%. Where did the 0.49% go? To understand this, you need to look at the price at which this bond is sold: 100.80% of par. That is, a bond with a face value of 1,000 rubles is sold for 1,008 rubles. This overpayment reduces the effective yield.

If you want not to overpay and increase profitability, you will need to buy bonds at a reduced price, but there must be some compelling reasons for this - for example, a sharp change in rates in the economy. Read about this in the “Market Risk” section.

One way or another, the exchange calculates the effective profitability, and this must be taken into account when evaluating.

Having found out the yield of a bond issue based on the price on the stock exchange, we need to somehow evaluate whether this is a good yield and whether it is worth buying such bonds. Usually in this case bonds are compared with government bonds.

For comparison, the issue of OFZ 25081 with a fixed coupon and maturity in January 2018 is suitable. The current yield of this OFZ issue is 8.8% - this is lower than that of Tinkoff BO-7. It turns out that Tinkoff Bank bonds are more profitable than the Ministry of Finance bonds.

The difference in profitability between the Ministry of Finance and Tinkoff Bank is explained by different credit risks. Tinkoff Bank has a higher risk.

Credit risk

Credit risk is the risk of default by the issuer, that is, the risk that the company will stop paying coupon payments or will not return the principal of the debt - the face value of the bond.

You can quickly assess credit risk using the credit rating of an international rating agency. Ratings are assigned to issuers, but individual bond issues may have their own ratings. The presence of a rating from an international agency already indicates a certain minimum quality and size of the issuer’s business.

Tinkoff Bank, according to its website, has a speculative rating of BB− with a neutral outlook from Fitch and a speculative rating of B1 with a neutral outlook from Moody's.

Due to higher credit risk, the yield on Tinkoff Bank bonds is higher than on OFZ bonds. The return difference is the risk reward that investors receive.

How is credit risk realized?

An example of the implementation of credit risk is the story of the Peresvet Bank.

At the beginning of October 2016, the Fitch agency pointed out some of the bank's risks, and the credit rating was not downgraded.

On October 13–14, news appeared about the disappearance of the chairman of the bank’s board. The Central Bank, which usually does not comment on the work of existing banks, issued a reassuring statement. Around the same time, a collapse in prices for Peresvet bonds began.

Prices for Peresvet bonds collapsed for an obvious reason - investors suddenly lost faith. The belief that the bank will pay its debts.

As I write this, Peresvet bonds are trading at 280 rubles per 1000 face value with a yield of approximately 380% per annum:

If the Central Bank revokes the bank's license, the circulation of bonds on the stock exchange will be stopped. After this there will be no place to find out the price - further fate the money invested will no longer touch the exchange.

Another striking example from the past is the cessation of the activities of Transaero, whose bonds are now traded at 20 rubles per 1000 rubles of face value, that is, two kopecks per ruble:

Compared to Transaero, Peresvet's bonds are still very expensive.

Market risk

In addition to credit risk, there is also market risk. This is the risk of changes in the situation in the financial market, in particular the risk of changes in interest rates in the economy.

This risk affects both government and corporate bonds equally. It is associated with rates in the economy: if they fall, then bonds become more expensive and yields fall. And vice versa.

How market risk is realized

Let's imagine that on October 31, 2014, we invested in government bonds with a maturity of one year and the yield of 9.5% existing at that time.

Just a month and a half later, on Black Tuesday, December 16, 2014, the Russian Central Bank, against the backdrop of a landslide devaluation of the ruble, simultaneously raised key rate immediately by 6.5 percentage points to 17% per annum.

The key rate, among other things, affects deposit rates and the profitability of many other financial instruments. Previously, roughly speaking, you had deposits at 9% and bonds at 9.5%. And now - deposits at 18% and bonds at 9.5%. Bonds with such yields suddenly become unprofitable.

If we now want to sell our bonds, we need to offer the market some competitive conditions, that is, to catch up with the yield of 18%. This can be done either by changing the coupon amount - that is, paying more on the debt - or by changing the value of the bond itself.

We cannot change the coupon amount, because we are not the Ministry of Finance. But we can change the price of the bond, that is, sell it cheaper than we bought it. Roughly speaking, we bought for 999 rubles, and will sell for 990. By reducing the price, we bring the profitability up to a competitive one.

What is the result: the rate has increased, competition among financial instruments has intensified. If we sell our bonds now, we will have to lose money.

Another option is to hold the bonds until maturity. That is, wait until the payment deadline comes, the Ministry of Finance will pay us the last coupon and return 1000 rubles for each bond. But the yield of 9.5% per annum at the time of maturity may be lower than the market one.

The opposite situation may also be true: in December 2014, people with strong nerves could buy the ones we were already familiar with. This means that such profitability will remain all the way until maturity. Compared to the current 9% yield, this is generous.

I looked at the example of government bonds because historical data on government bond yields is easily available on the Moscow Exchange website. The same thing happened with corporate ones.

Profitability after taxes

The effective yield of Tinkoff BO-7 according to exchange calculations was 11.21%. However, unlike government bonds, corporate coupons will have to pay income tax individuals(NDFL). The issuer or depository will deduct taxes, and the coupon will come to you already cleared of taxes. And this radically changes the picture.

Excluding personal income tax, the effective yield of Tinkoff BO-7 will be about 9.20% per annum, and the simple yield - 8.63% per annum. Thus, personal income tax sharply brings the profitability of the Tinkoff BO-7 corporate issue closer to the profitability of state OFZ 25081. At the same time, the difference in risks is significant.

Don't forget about deposits. Depending on the terms of replenishment and capitalization, the deposit rate at Tinkoff Bank for the same 14 months will range from 6.69 to 8.29% per annum.

The corporate bond market is an important component of the financial market by which one can judge the state of the country's economy as a whole. In recent years, the volume of this market has continued to grow, but the pace of its further development is questionable due to the current state of affairs in the international community and sanctions foreign countries in relation to the largest Russian companies. This article analyzes the state of the Russian bond and Eurobond market as of May 2018. The structure and volume of funds raised in the form of bonds and Eurobonds by industry and currency were examined: companies belonging to the oil and gas industry are in the lead in terms of the amount of funds raised through the issuance of corporate bonds ( 33%), banks (21%) and financial institutions (19%). The article also discusses the features of commercial and exchange-traded bonds, the conditions for their placement and circulation, as well as the issues that took place in 2018. Based on the results of the analysis of the current state of the Russian corporate bond and Eurobond market, it was concluded that its growth will continue despite external shocks.

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commercial bonds

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1. Cbonds Bond Newsletter, April 2018.

2. Cbonds company website URL: ru.cbonds.info (access date: 05.15.2018)

3. Official website of the Central Bank of the Russian Federation URL: www.cbr.ru (access date: 05.15.2018)

4. Official website of PJSC Moscow Exchange URL: www.moex.com (access date: 05.15.2018)

5. Official website of Reuters URL: www.ru.reuters.com (access date: 05/15/2018)

At the end of April, the volume of the Russian corporate bond market increased slightly and amounted to 11,740.76 billion rubles (excluding overnight VTB bonds (programs of the KS-1 and KS-2 series) and short-term bonds of VEB, 11,658.11 billion rubles at the end of March).

Figure 1 Structure of the domestic debt market of the Russian Federation

Source: Cbonds Bond Newsletter, April 2018

Compared to April 2017, the current volume of the corporate bond sector increased by 20.1%.

In circulation on at the moment There are 1,373 issues of corporate bonds issued by 405 issuers. In April 2018, 18 new issuers entered the market, placing 20 new issues worth RUB 92.15 billion. In April last year, there was the same number of new issues; the placement volume amounted to 148 billion rubles.

In terms of the number of funds raised through the issuance of corporate bonds (as of April 30), the leaders are companies belonging to the oil and gas industry (33%), banks (21%) and financial institutions (19%). Very small amounts of financing through the issuance of bonds (less than 1% of the total volume) were attracted by the following industries: non-ferrous metallurgy, food and light industries, as well as the agro-industrial complex agriculture(Fig. 2).

Figure 2 Funds raised by industry (as of early May 2018)

Source: ru.cbonds.info

Yields on new issues continue to show an upward trend. The indicator of the IFXCbonds total return index (To form a list of bonds on the basis of which the IFX-Cbonds index is calculated (initially all ruble corporate bonds included in the quotation lists ("A1", "A2" and "B") of the Moscow Exchange are considered) stopped at at 565.61 points (11.76% higher than the end of April 2017); effective yield - 7.39% per annum (176 bp lower than the end of April 2017).

Let's take a closer look at Russian Eurobonds. Only 7.8% of the total volume of corporate bonds of the Russian Federation accounts for loans denominated in euros, and 14.3% for loans denominated in dollars (13.073 billion euros and 1676.5 billion dollars, respectively). The largest number of Eurobonds - 152 issues - belong to financial institutions; followed by banks (78 issues) and oil and gas companies (38 issues). More details on the sectoral structure of Eurobonds can be found in Table 1.

Table 1 Industry structure of Eurobonds in circulation (at the beginning of May 2018)

Source: ru.cbonds.info

Despite the leading positions of financial institutions in terms of the number of issued Eurobonds, the largest volume of funds raised belongs to the Banking sector. It amounts to 39.06 billion in dollar equivalent or 32.5% of the total volume of Russian bonds. Second place belongs to the oil and gas industry: 35.92 billion in dollar equivalent and 30%, respectively (Table 2).

Table 2 Industry structure of Eurobonds of the Russian Federation (as of the beginning of May 2018)

Source: ru.cbonds.info

Let's analyze corporate bonds in a similar way. Here the “places” by the number of issued issues were distributed in a similar way: greatest number bonds also from financial institutions - 420 issues; followed by banks (331 issues) and oil and gas companies (116 issues). The industrial sectors have the smallest number of issued bonds (Table 3).

Table 3 Industry structure of bonds in circulation (as of the beginning of May 2018)

Source: ru.cbonds.info

Despite the leading positions of financial institutions in terms of the number of bonds issued, the largest volume of funds was attracted by companies in the oil and gas industry. It amounted to 3,682.9 billion rubles or 32.15% of the total volume of Russian bonds. Second place belongs to banks with 2,848 billion rubles and 24.1%, respectively (Table 4).

Table 4 Industry structure of bonds of the Russian Federation (as of the beginning of May 2018)

A company that is proposed to issue securities for the first time must clearly understand that the placement of securities is a rather long and complex process, consisting of a large number of interrelated events, activities and restrictions. The success of the upcoming securities issue largely depends on how it is prepared. The implementation of the issue should be based on a clear understanding of the goals and detailed elaboration of the projects financed with its help.

The issue procedure includes the following stages:

1. Making a decision on the placement of bonds;

2. Approval of the decision to issue securities;

3. State registration of the issue of securities;

4. Placement of bonds;

5. State registration of the Report on the results of the issue (additional issue) of securities.

Preparatory stage:

The issue of bonds is permitted no earlier than the third year of the company’s existence and subject to proper approval of the annual financial statements for two completed financial years.

The nominal value of all bonds issued by the company (volume of issue) must not exceed authorized capital company and (or) the amount of security of third parties.

The company has no right to place bonds until the authorized capital is paid in full.

Fulfillment of obligations under bonds can only be secured by pledging securities or real estate, guarantee, bank guarantee, state or municipal guarantee.

Bonds whose issue has not passed state registration are not subject to placement.

Bonds are paid for by their purchasers only in cash.

Circulation of corporate bonds on the secondary market

The enterprise should not forget about the need to organize a secondary bond market. A bonded loan differs from a loan in that it is a market debt that can easily be assigned by one creditor to another. If bonds are not traded on the market, then the idea itself disappears, and with it the advantages of issuing bonds as a financial instrument.

The need to organize a secondary bond market is obvious already during their placement. The issuer must take care to create a secondary market for its bonds. This is necessary because investors are interested in the liquidity of bonds. Liquidity is, if not the first, then at least the second most attractive feature of bonds.

At the same time, liquid bonds may be less profitable. Consequently, the issuer must be interested in the liquidity of its bonds in order to be able to issue placements at low interest rates. In addition, bonds with a put option will be attractive, that is, those that the investor can sell back to the issuer at certain points in time. When placing such bonds, the relationship between the investor and the issuer is not limited to a one-time placement. The investor has the opportunity to sell the bonds back to the issuer. At the same time, an enterprise can regularly issue offers to repurchase its bonds to increase demand for its bonds, which significantly strengthens investor confidence in such securities. If the issuer is not interested in buying back its obligations at the moment, then, in the presence of a secondary market, the investor may not wait for the moment when he can present the bonds to the issuer for early redemption, but simply sell them on the secondary market. If the issuer is interested in purchasing as large a volume of bonds as possible, then this is easier to do if there is a liquid secondary market. A company should not expect to be able to place a large bond issue right away. At first, only a relatively small volume can be accommodated. And whether the company succeeds in creating a secondary market for this volume of bonds and demonstrating the attractiveness of its bonds will determine the company’s ability to place additional additional larger volumes in the future.

The above allows us to conclude that both investors and the issuer are interested in forming a secondary market for their bonds. But the initiative to create such a market should come, first of all, from the issuer.

When placing bonds with a variable coupon rate, the issuer receives a good indication of what interest rate it makes sense to set for the next coupon period. If bonds are trading at a price above par, therefore, the current coupon rate is perceived by investors as high enough, and the company has the opportunity to set a lower interest rate for the next period. On the contrary, if bond prices on the secondary market are less than par value, the company must either increase the coupon rate for the next period or take other measures to increase the attractiveness of this issue. For enterprises whose securities are traded on the organized stock market, the legislation provides for the appropriate tax benefits. Thus, in accordance with the “Regulations on the composition of costs for the production and sale of products (works, services), included in the cost of products (works, services), and on the procedure for forming financial results taken into account when taxing profits”, approved by Decree of the Government of the Russian Federation dated 05.08.92 No. 552 (as amended on 31.05.2000) Section II, clause 15, paragraph 4,5,6 payment of interest on bonds traded on the organized stock market is included by the issuer included in non-operating expenses. For tax purposes, the costs of paying the specified interest are accepted within the current refinancing rate of the Central Bank of the Russian Federation, increased by three points. Thus, virtually all the main costs associated with the issue, circulation and payment of interest on corporate bonds, if they are traded on the organized securities market, are included in the cost price.

Regardless of how the secondary market is created, and in what trading system (or outside trading systems) bonds are circulating, one or more market makers are required to maintain liquidity. Market makers issue bilateral quotes for the purchase and sale of securities and carry out transactions with them. At the same time, market makers ensure that the difference between buy and sell quotes does not exceed a certain value - the permissible spread.

The activities of a market maker in transactions with securities, the liquidity of which he maintains, require the availability of funds to carry out operations and maintain quotes. Therefore, an issuer interested in having a liquid market for its bonds must form a liquidity maintenance fund, the funds of which are placed at the disposal of market makers. The size of such a fund can be determined empirically during trading. According to experts, the size of such a fund should be about 3-4% of the total volume of issued bonds, and in the future this value can be reduced to 1-2%.

To maintain a secondary market, an enterprise must implement investor relations programs. How more news investors have from the issuer, regardless of how the market evaluates them (negative or positive), the more active the market is. Moreover, it is the flow of such news that ensures an aperiodic change in such a qualitative parameter of the stock market as “volatility” (variability), which attracts speculators to the market and the number of participants in trading operations grows. This, in turn, further increases market liquidity.

Working with bond loans is a long process. And building an image of a good borrower with a public credit history can be valuable intangible asset enterprise, due to which the enterprise will be able to significantly reduce the cost of borrowed funds in the future. At the same time, those enterprises that entered the bond market first will have the highest image (and the lowest interest rate).

The secondary market for corporate bonds is mainly carried out on stock exchanges.

Let's consider the possibilities of trading corporate bonds on the exchange market, namely on the MICEX and the MSE.

IN general view securities admitted to circulation on the stock exchange consist of: securities that have undergone the listing procedure and included in the quotation lists of the 1st or 2nd level; from securities admitted to circulation on the stock exchange without inclusion in the quotation lists of the stock exchange (non-listed securities); from securities admitted to placement on the stock exchange.

The inclusion of securities in the quotation lists of the exchange is preceded by a listing procedure, which establishes strict requirements for the issuer, its bonds, etc. (see Table 2).

Table 2: Requirements for listing.

As can be seen from the table, the inclusion of bonds in the quotation lists of the stock exchange is possible, perhaps, only for large issuing enterprises, which, in principle, themselves should be interested in this, since this increases the liquidity of their bonds and allows them to place large volumes of them among a wide range of investors .

For small and medium-sized enterprises, it is more convenient and less labor-intensive to include bonds in the unlisted list of securities traded on the stock exchange. This is due to the fact that, firstly, such enterprises, as a rule, have a small issue volume and the circle of investors is known in advance, and secondly, there is a reason to attribute interest (discount) on bonds according to the established standard to expenses. Perhaps the only difficulty (as, indeed, with securities included in the 2nd level quotation list) may arise when attracting credit institutions as investors.

The basis for considering the issue of admitting bonds to circulation on the MSE as non-listed securities is a standard application from the issuer or trading participant.

The MICEX requires two such statements: from the issuer and the trading participant. The peculiarity in the latter case is that the MICEX management has the right to decide on the admission of bonds to circulation even without these statements.

Additionally, notarized copies must be provided to the exchange: constituent documents of the issuer; document confirming the assignment of a state security to a security registration number; prospectus or decision to issue bonds; report on the results of the bond issue; bond forms (on MICEX); applicant's questionnaire (on the IFAC).

The basis for the exchange's decision to cease circulation of unlisted securities is: cancellation state registration securities; liquidation of the issuer of the security; declaring the issuer of a security insolvent; expiration of the security's circulation period.

Corporate bonds continue to be an attractive investment instrument due to their high returns with relatively low risks. For business entities they remain a cheap way of borrowing. The issue of corporate bonds allows you to use borrowed funds on terms that are more attractive than bank loans.

What are corporate bonds

Corporate bonds are a financial instrument in the form of securities that allow you to attract borrowed funds on a paid basis. This type of loan, in contrast to the issue of shares, allows the owners of the enterprise to maintain control over management decisions. Short-term commercial bonds allow you to raise funds to replenish working capital. Medium- and long-term bonds are used to implement large-scale development projects. This includes equipment upgrades and other investments with a long payback period.

Bonds issued by corporations are debt securities that confirm two rights:

• for the owner to receive the nominal value from the issuer within the established period;
• for remuneration in the form of interest or other property values.

In other words, bond buyers receive a stable income over the life of the security. At the end of the maturity period, the corporation buys back the bonds from holders at par value.

Corporate bonds, the yield of which is higher than that of government bonds, belong to the more profitable and risky segment of securities.

Unlike a loan, debt obligations between the lender and the borrower do not require a guarantee or collateral.

Interest on bonds is paid before profits are distributed to shareholders. In the event of a company's bankruptcy, bond debts have higher priority than shares.

The disadvantage for investors is lower profitability and the lack of opportunity to influence the management activities of the company.

Corporate bonds are divided into the following types:

• urgent and revocable;
• registered and bearer;
• regular and targeted;
• with distributed and one-time repayment;
• secured and unsecured.

Investors receive different types income from owning bonds: fixed and floating coupon income, discount income due to purchases at a discount and redemption at par.

Issuing corporate bonds: benefits for the issuer and investor

The issue of a company's bonds ensures its entry into the capital market without changing the structure and redistributing ownership rights and management of the company.

Bonds are especially attractive for companies that are undervalued by the stock market. Russian market Corporate bonds allow such enterprises to consolidate large assets without diluting the share of existing shareholders. The issue of securities provides the opportunity to fulfill current tasks and long-term plans. Bonds allow you to cheaply refinance the issuer's debts and easily find money to launch new projects that are not related to the company's core activities.

Investors prefer company bonds for the following reasons:

• a stable percentage of income that can only fall if the company goes bankrupt;
• transparent information on the asset, facilitating an accurate assessment of the risk of default;
• greater reliability of bonds compared to shares;
• possibility of conversion into shares and sale on the secondary market;
• benefit due to preferential taxation;
• profitability exceeding the deposit rate (consolidated income from coupon payments, discounts and speculative transactions).

Disadvantages of Corporate Bonds

The obvious advantages of corporate bonds are offset by a number of disadvantages:

• Being a higher priority obligation, bonds provide high reliability. But less risky instruments in the financial market have low returns. Therefore, this type of securities cannot provide high returns comparable to investments in shares.
• The lack of opportunity to participate in the management of the company greatly limits the tools available to large investors seeking to expand their sphere of control.
• High reliability of bonds reduces volatility. It makes sense to buy bonds in anticipation of long-term price growth. However, they cannot act as a speculative instrument.

Examples of bonds of Russia and foreign countries

Bonds of Russian companies for last year managed to increase in price and lose profitability. The coupon income graph is steadily moving down along with banks' deposit rates. Plans to reduce the discount rate announced by the central bank will also affect 2018 corporate bonds.

This is a completely natural phenomenon: the growth of the corporate bond index is invariably associated with a fall in their yield. An increase in speculative income on bonds leads to a decrease in the average interest rate in the market.

However, even the manipulations of the Central Bank could not dislodge corporate bonds from their leading positions among fixed income instruments. They are confidently ahead of bank deposits in this regard.

We bring to your attention the most profitable corporate bonds on the Moscow Exchange:

• short-term bonds of Alfa Bank and the 36.6 pharmacy chain;
• long-term bonds of the Agency for Housing and mortgage lending" and "Binbank";
• Eurobonds of Tinkoff, Renaissance Credit and VTB banks.

The yield on corporate bonds is 9.5% or more, which is significantly higher than the deposit rates presented by Sberbank and other leading banking institutions. Taking into account the similarity in reliability indicators of deposits and bonds, investments in bonds look more attractive.

Russian investors can invest in foreign bonds through investment funds or directly. To minimize risks, you should focus on the credit ratings of Moody’s and other reputable rating agencies.

Where are bond lists published?

Investors are especially interested in corporate bonds issued in 2018, the list of which is presented on specialized Internet resources:

Here you will find up-to-date information on the issue of new securities and the state of affairs on the secondary market. Indicators of issue volume, terms of interest payment, exchange rate dynamics and turnover on the secondary market will help you navigate the market and choose the best investment offer.

Corporate bonds are a way for private enterprises to attract finance to their business.

This type of securities gives entrepreneurs the opportunity to make a profit at a lower interest rate than banks. The issuer that issues this type securities reserves full ownership of the company, without restructuring.

Benefit for the issuer

It is beneficial for the issuer to issue corporate bonds because in this way he will be able to create additional capital without restructuring the structure of the enterprise. It is also worth considering the fact that the stock market is not very kind Russian companies. This means that issuing shares by a company and selling them at low prices can significantly affect the shares of existing shareholders. On this side, bonds are a more profitable way to attract financing compared to selling shares.

Benefit for the investor

Purchasing corporate bonds is also beneficial for private investors, since they know in advance what income they will receive from this. It will be possible to lose the invested funds only if the company goes bankrupt. In addition, the investor can always track information on these assets, which allows them to think about possible default risks in advance. Unlike stocks, bonds are more reliable. They can be compared to bank deposits, only in the case of bonds the profitability will be much higher. In addition, with the existing agreement, there is the possibility of early repayment or resale. They can also be converted into shares if necessary.

Types of corporate bonds

They differ according to many criteria. Firstly, they are divided by urgency

• with a specified period: short-, medium-, and long-term;
• without a specified period: revocable (returned before the deadline. In this regard, details are discussed in advance with the issuer); deferred (allow the issuer to delay the maturity date); as well as renewable (implies that the investor has the opportunity to extend the term of the bonds and receive interest from them).

By order of ownership

• registered - the name of the bond holder is indicated on the papers, which is also registered by the issuer;
• bearer - bonds must be presented to indicate ownership.

According to the purposes for which funds are raised

• standard - used to support any type of activity of an enterprise;
• targeted - which are necessary within the framework of a specific project;

By repayment method

• one-time repayment;
• with periodic repayment, when some part of the value at par is paid over a certain period of time;
• gradual repayment - depends on the total number of bonds;

By payment method

• fixed rate;
• floating rate;
• increasing rate - used to protect profitability from inflation;
• zero coupon - placed on the market at a value less than the nominal value;
• at the owner’s choice - either a coupon or bonds for a new loan;
• combined payments - part is received in the form fixed rate, and the other is floating;

By degree of protection

• bonds of large enterprises with a good reputation;
• bonds for speculative purposes.

Additionally, bonds may or may not be secured by collateral.

What are they used for?

Corporate bonds are divided into two types: short-term and long-term. In the first case, we are talking about zero-coupon bonds. They are typically sold below face value, but it increases as they approach the maturity date. If we talk about long-term bonds, they provide the investor not only with the return of the initial investment, but also with interest payments. The purposes of creating corporate bonds include the following:

• Unlike the use of shares, management retains the right to manage the company's activities.
• Attracting additional financing necessary to ensure the achievement of the company's goals.
• Thanks to bonds, the issuer can obtain resources for promising projects.
• For refinancing purposes.
• As an additional source of funds for projects not included in the main activities of the enterprise.

Peculiarities

Corporate bonds have a market value and a par value. Speaking of nominal, we mean those resources that the issuer borrows from the investor and will have to return at the end of the term. During circulation - from the moment of issue to the moment of repayment of the debt, the value of the bond may vary. It will be sold at the price assigned to it by the market. This type of securities is a guarantor of debt relations between the issuing company and the investor. They are an independent financial object, with their own exchange rate. Bonds have the same basic characteristics as other securities.