Stocks, bonds - quotes allow you to see the state of Russian business. How to buy bonds on the MMVB
In this article, we will talk about how to buy a bond on the MICEX, but not only buy, but also earn on this operation.
A bond is, first of all, an instrument that is only part of an overall investment strategy, so let's quickly get acquainted with the theory that guides me when investing.
The principle of investing that I adhere to
Let's imagine an ordinary person who works and gets paid for it. He spends this money on urgent needs, but something remains. If he needs to buy something that goes beyond his financial capabilities, he willingly takes a loan and buys: a car, TV, computer, etc. But for this opportunity, to get a loan, our hero has to pay interest on the loan - 20- 50% and sometimes more.
Now look what happens: he raises borrowed funds and pays a solid interest to the bank. In fact, overpayment for goods significantly worsens the financial situation of the borrower.
When to take out a loan
Credit is a tool that can be both useful and harmful. For example, if you are a business owner and can raise money at 20% per annum, and use it profitably, while receiving 60% per annum, it is obvious that in this case the use of a loan is justified. You can also borrow a car if the vehicle is a source of your income, and not a luxury item.
An alternative to a loan is a bank deposit
The loan has an alternative - lend money yourself at interest! The easiest and safest way to borrow money at interest is to use a bank deposit. In fact, the bank attracts depositors' money and pays interest for it. In Russia, this percentage can range from 6% to 12%.
Putting, for example, 1,000 rubles on a bank deposit, for a year, at a rate of 10% per annum, you will receive 100 rubles of profit. But taking into account inflation, which in the Russian Federation is within 6% (officially, and unofficially - more than 12%), the attractiveness of a bank deposit is not high. However, there is a way to increase the profit on the deposit.
How to increase profit (interest) on a bank deposit
To improve the financial result of the operation, when the money is placed in a bank deposit, it is necessary to use short-term banking products and avoid long-term ones (without monthly capitalization).
There is one trick that not many depositors know about - increasing bank interest through the use of compound interest.
If you are charged the required percentage of profit on a bank deposit once a year (without capitalization every month or quarter), then you use simple interest. But if the interest on the deposit is calculated every month, then every new month the interest will be calculated by the amount: deposit + interest paid for previous months. For reference: when investing 1,000 rubles for 12 months at a rate of 10% per annum and accruing interest (capitalization) monthly, you will receive a profit not of 100 rubles, as with simple interest, but 104.71.
I understand that for the given amount the difference is not so significant, but at least we have figured out what is the difference between simple and compound interest.
So, in order to improve the financial result of a bank deposit, it is necessary to use short-term deposits and avoid long-term ones. At the very least, you need to choose those deposits where monthly capitalization is applied.
Disadvantages of bank deposits
Unfortunately, the use of bank deposits imposes a number of unpleasant restrictions on you:
- the bank sets the minimum deposit amount, on the value of which the interest offered by the credit institution depends - banks are interested in receiving long-term money (for a long period);
- if you need to withdraw money from the deposit, you lose the accumulated interest;
- the procedure for closing a deposit in some banks takes a lot of time and effort of the depositor.
Deposits or bonds
Buying bonds on the MICEX is, in fact, an alternative to using bank deposits. You can buy a bond that will be redeemed in 5-10 days or a month, or in a few years, so you get the opportunity to earn in the short term, although there is still an opportunity for medium and long-term investments.
I do not believe that bonds are a complete and unconditional alternative to a bank deposit and I separate these two instruments as complementary: it is safer to store large amounts in bank deposits, and it is more efficient to “scroll” savings in bonds and stocks, so that later capital with accumulated income can be transferred to the bank at interest.
The principle of preserving and increasing capital
Let us return again to our subject, who did the work and received a wage. Suppose he wants to purchase, for example, a computer. But, after reading this article, he does not want to resort to using a loan, but saves money and lends it to borrowing enterprises at interest - he buys bonds.
Each month, the householder we observe buys bonds at a par value of 1,000 rubles and with a yield of 10-15%. Such investments bring the best return. I would suggest that he invest part of the funds in the stock market, but this possibility is beyond the scope of our discussion.
In fact, it happens that the yield of individual bonds rises, for example, when it is thrown off by a large holder, and you and I have the opportunity to buy it at an attractive yield of 20-50%. But I would not recommend abusing such opportunities, because the company to which you lend your funds may expect a default. As a consolation, we can say that debts to bondholders are repaid in the first place (according to the current legislation), but no one is guaranteed (100%) from the loss of investments in the bond market. It is necessary to clearly understand which bonds are worth buying and which ones should be avoided.
What bonds should you buy
So, you've decided to buy your first bond and see what yield it brings you. To do this, I recommend opening an account with Alfa Direct, because this broker has unlimited deposits - you can deposit at least 100 rubles and buy a certain number of shares (small lots) for this amount.
Bonds, as a rule, have a face value of 1,000 rubles, but they also come across with a face value of 400 rubles. Thus, to buy 1 bond, you need to deposit 1,000 rubles to your exchange account.
Buy should be bonds, the maturity date of which is approaching - 1 month, 10 days. If you want to spend money in bonds for a longer period of time, still choose bonds with a maturity date of no more than 1-2 months - this will provide the best return on your investment, and after a month you can buy more bonds for a month.
It is also necessary to pay attention to such an important parameter as trading volume. Bonds with a trading volume of less than 1,000,000 rubles should not be bought, because it is dangerous (they are illiquid).
Profitability choose not much higher than the average bank deposit - 10-15 (maximum 20%) per annum. It is better not to take risks, but to invest in reliable instruments.
It is better to choose a well-known company, for example: the leasing company Uralsib, Gazprom, Vimpelcom, etc.
In some cases, I buy bonds of other companies. Remember that the indicator of a company's reliability is low bond yields. In turn, the higher the yield of bonds, the less trust the company deserves from borrowers - a bad reputation or problems in the company's business force its leaders to borrow money at a high interest rate.
How to buy a bond on MICEX in Alfa Direct
To quickly deposit / withdraw funds for trading (Alfa Direct), I recommend opening a bank account with Alfa Bank, although this is not a prerequisite for a successful purchase of bonds.
How to buy a bond in Alfa Direct
After the money has been credited to the account, you need to launch the terminal - Alfa Direct (if you are a client of another broker, this may be a different platform).
In the window that appears, right-click and select "Add Tool" from the context menu.
You need to remove all stock quotes that appear by default in the "Selected Instruments" window and add the entire "MICEX SEC" tab (the sector of the MICEX market where only bonds are traded) to the empty window located on the right.
Now that the lists of bonds have appeared in the window, right-click on the "Quotes" window area and select the "Setup" context menu item.
Now sort the bonds by maturity date so that you have bonds with close maturities at the top - this is done by double-clicking on the Redemption heading.
Now we need to find a bond with the nearest maturity and a volume of at least 1,000,000 rubles. As of May 19, 2014, the best option is RSG-Finance, whose trading volume is more than 140,000,000, and the yield is 13.09%.
Click to enlarge screen
Now we select the line with the bond we have chosen and right-click, select the "Queue of applications" item in the context menu - we need to look at the applications of bidders, with what yield they want to buy and sell bonds.
There are buyers in the order book who want to buy this bond with a yield of 13.09%, while sellers seek to sell bonds with a yield of 11.75% or less.
It is profitable for us, as buyers, to purchase this bond with the highest yield and, at the same time, not to stand in the glass for too long. Therefore, I usually place an order at a price slightly above demand, but below supply, for example, you can try to buy a bond at a price of 100.09 - below sellers and above buyers.
If you buy several bonds, you can put them at different prices and see which of the orders will be filled. It is also desirable to plot a given bond in order to see how its price has changed over time, in order to place an order within its movement range and look for the best price for yourself. But this is not necessary for our tasks - it is enough to place part of our funds for a month, at a good percentage.
How dividends (income) are calculated on bonds
The accrual of income and the return of the nominal value of the bond is quite simple - without the participation of the bond holder.
On the redemption day, the bond will disappear from your portfolio, and after 3-5 days its face value and accumulated income will be credited to your exchange deposit, from where you can safely withdraw this money to a bank account or buy a new number of bonds with them.
I hope I have described the procedure for buying bonds in sufficient detail here and explained why it is worth using this tool. If after reading you have any questions, be sure to ask them using the comment form or the convenient contact form, which is located in the "" section.
I wish you a reasonable and profitable investment!
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For those who read a lot and count well
It can be seen from the card that Tinkoff BO-7 is an issue of ruble bonds with a face value of 1,000 rubles with a semi-annual coupon. That is, you can give money to Tinkoff Bank in multiples of 1,000 rubles, and the bank will pay 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 1,000 rubles, Tinkoff Bank will pay you 58.34 rubles every six months.
The bonds will mature 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 wish. In the card, the opportunity is indicated by the word put in the line of the third coupon. Here's how it's worded in the documentation:
"The issuer will be obliged to purchase exchange-traded bonds according to the requirements of their owners, declared during the last five business days of the third coupon period."
The possibility of early repayment is called an offer or a put option.
Thanks to the offer, the five-year issue becomes a two-year issue. That is, the owners of Tinkoff BO-7 bonds can receive their money not in 2021, but already in 2017, if they want.
Before the offer comes, the bank will announce the rate of the next coupons. If the rate is attractive, then the bonds can not be redeemed, but kept on.
What is an offer or put option?
Many Russian corporate bonds have put options. This means that in a certain period the bondholder has the right to present the bonds for redemption at face value. That is, ahead of schedule to return to himself the money that he, as it were, lent.
Most often, the issuer grants such a right when the coupon rate has not been 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 not be profitable for the holder. In such a case, the holder should be able to exit the game. That's what offers are for.
There are issues in 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 falls below the market rate, then the holders will be able to present the bonds for redemption.
How you will redeem your bonds under the offer 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 deal with a special agent.
In addition to the broker's commission, a depository commission may also appear - the company that, as it were, 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.
Yield
For a private investor, the yield on bonds on the exchange will never be equal to the coupon yield. The fact is that the rate on the market is constantly changing, and after them the price of bonds is changing. I talked about the impact of price on profitability
You can find out the current price and profitability on the exchange. To do this, we look at the prices and profitability of previous transactions or existing orders. Roughly speaking, under what conditions are bonds now traded in fact, and not on paper.
In my QUIK exchange terminal, there is a table with twenty best buy and sell orders. Red lines - sale, green lines - purchase:
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 the purchase and holding of these bonds to maturity under 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 a deposit without interest capitalization.
But the Moscow Exchange calculates the so-called effective yield. The effective yield is the yield, taking into account the reinvestment of coupons at the same rate at which the original investment was made. Continuing the analogy with a deposit, this is a deposit with interest capitalization. Profitability with capitalization is greater.
The calculation of effective yield is based on a number of assumptions. For example, that you can reinvest coupons at the same rate. In practice, this is not always feasible: the rate may change, your coupon payments with a small package may not be a multiple of the purchase price of the bonds.
Also, the effective yield is considered relative to the price offered on the exchange, and not nominal. If you remember, the bonds of Tinkoff Bank at issue had a yield of 11.7%, 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 the face value. That is, a bond with a face value of 1000 rubles is sold for 1008 rubles. This overpayment reduces the effective yield.
If you want not to overpay and increase yields, you will need to buy bonds at a lower price, but there must be some good reasons for this - for example, a sharp change in rates in the economy. Read more about this in the Market Risk section.
One way or another, the exchange calculates the effective yield, and this must be taken into account when evaluating.
Having learned the yield of a bond issue at 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 redemption in January 2018 is suitable for us. The current yield of this OFZ issue is 8.8%, which is lower than that of Tinkoff BO-7. It turns out that the bonds of Tinkoff Bank are more profitable than the bonds of the Ministry of Finance.
The difference in yield between the Ministry of Finance and Tinkoff Bank is explained by different credit risk. 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 body 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 of 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 the higher credit risk, Tinkoff Bank bonds yield higher than OFZ bonds. The difference in returns is the risk reward that investors receive.
How credit risk is realized
An example of the implementation of credit risk is the story of the bank "Peresvet".
In early October 2016, the Fitch agency pointed out some risks to the bank, and the credit rating was not downgraded.
On October 13–14, news broke that the chairman of the board of the bank had disappeared. The Central Bank, which usually does not comment on the work of existing banks, issued a reassuring statement. Around the same time, a landslide drop in prices for Peresvet bonds began.
Prices for Peresvet bonds collapsed for obvious reasons - investors lost faith. Belief that the bank will pay off its debts.
As I write this, Peresvet bonds are trading at 280 rubles per 1,000 face value with a yield of approximately 380% per annum:
If the Central Bank revokes the license of the bank, then the circulation of bonds on the stock exchange will be terminated. After that, there will be nowhere to find out the price - the further fate of the invested money will no longer concern the exchange.
Another striking example from the past is the termination of Transaero, whose bonds are now trading at 20 rubles per 1,000 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 on 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 connected with rates in the economy: if they fall, then bonds rise in price, 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 current yield of 9.5%.
Just a month and a half later, on Black Tuesday, December 16, 2014, the Russian Central Bank, against the backdrop of a massive devaluation of the ruble, immediately raises the key rate by 6.5 percentage points to 17% per annum.
The key rate, among other things, affects deposit rates and the yield of many other financial instruments. You used to have, roughly speaking, deposits at 9% and bonds at 9.5%. And now - deposits at 18% and bonds at 9.5%. Bonds with such a yield become sharply unprofitable.
If we want to sell our bonds now, we need to offer the market some competitive conditions, that is, to catch up with 18% yield. This can be done either by changing the amount of the coupon - 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 value of the bond, that is, we can sell it cheaper than we bought it. Roughly speaking, we bought for 999 rubles, and we will sell for 990. By lowering the price, we are catching up with competitive profitability.
As a result: the rate has increased, the competition of financial instruments has intensified. If we sell our bonds now, we will have to lose money.
Another option is to hold bonds until maturity. That is, wait until the payback period comes, the Ministry of Finance will pay us the last coupon and return 1,000 rubles for each bond. But the yield of 9.5% per annum by the time of redemption may be lower than the market.
Maybe the opposite situation: in the same December 2014, people with strong nerves could buy already familiar to us. This means that such yield will be all the way up to maturity. Compared to the current 9% yield, this is generous.
I considered the example of government bonds because historical data on government bond yields are readily available on the Moscow Exchange website. The same thing happened with corporations.
Yield after taxes
The effective yield of Tinkoff BO-7, according to the exchange's calculations, was 11.21%. However, unlike government bonds, corporate coupons will have to pay personal income tax (personal income tax). Taxes will be deducted by the issuer or depositary, 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, the personal income tax brings the yield of the Tinkoff BO-7 corporate issue sharply closer to the yield 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 rate on a deposit in Tinkoff-Bank for the same 14 months will be from 6.69 to 8.29% per annum.
Bonds, as fixed-income instruments, make it possible to diversify investment portfolios with high quality. With their help, you can create strategies focused on stable capital gains with varying degrees of risk and return, as well as structured products in which bonds are used to hedge positions in stocks or in the derivatives market.
The yield of many bonds exceeds the expected rate of inflation and the average yield of a bank deposit and depends on the credit quality of the issuer, their maturity and market conditions. Using this section, you can easily select bonds for investment using criteria such as maturity / offer, liquidity, yield and others, as well as monitor the market situation from our reviews.
Name paper |
date of repayment |
date of offers |
duration, years |
Effective yield, % per annum |
Change profitability |
Coupon (once/year) |
Currency | Price (% of nom.) |
Price (Chang.%) |
Price (Spread bid/ask) |
Index liquidity |
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Name paper |
date of repayment |
date of offers |
duration, years |
Effective yield, % per annum |
Change profitability |
Coupon (once/year) |
Currency | Price (% of nom.) |
Price (Chang.%) |
Price (Spread bid/ask) |
Index liquidity |
Moscow Exchange data. Delay 15 minutes.
DOHOD Investment Company, Joint Stock Company (hereinafter referred to as the Company) does not promise or guarantee the return on investments. Decisions are made by the investor independently. In preparing the materials contained on this page, information was used from sources that, in the opinion of the Company's specialists, are trustworthy. At the same time, this information is intended solely for informational purposes, does not contain recommendations and is an expression of the private opinion of the specialists of the Company's analytical service. Regardless of the care with which the Company's specialists treated the compilation of this page, the Company does not give any guarantees regarding the accuracy and completeness of the information contained herein. Under no circumstances should anyone consider this information as an offer to conclude an agreement on the securities market or other legally binding action, both on the part of the Company and on the part of its specialists. Neither the Company, nor its agents, nor affiliates shall be liable in any way for any losses or expenses associated directly or indirectly with the use of this information. The information contained on the page is valid at the time of its publication, while the Company has the right to make any changes to the information at any time. The Company, its agents, employees and affiliates may, in some cases, engage in transactions with the securities referred to on this page or enter into relationships with the issuers of these securities. The results of investing in the past do not determine income in the future, the state does not guarantee the profitability of investments in securities. The Company warns that transactions with securities are associated with various risks and require relevant knowledge and experience. When forming the Liquidity Index, the latest available official results of trading in the relevant securities provided by the Moscow Exchange are used as of the data publication date.
Risks and taxation
How to start?
A bond is a debt security, according to which the issuer undertakes to return to the investor the amount borrowed from him, as well as to pay interest within a certain period of time. Buying a bond means you are lending money to the issuer. A bond is issued for a limited period during which the issuer pays the bondholder a percentage of the face value.
Types of bonds
Bonds there are interest And discount.
By interest-bearing bonds During the life of the bond, the issuer pays a periodic interest called a coupon. The vast majority of bonds traded on Russian stock exchanges are interest-bearing.
By discount bonds coupons are not paid. These bonds are issued at a discount, i.e. less than the face value of the bond, and they are redeemed at face value. Thus, the income of the bondholder is the discount - the difference between the issue price and the face value.
By type of issuer bonds are state, municipal, corporate.
Corporate bonds are issued by corporations (industrial groups and institutions).
Government bonds are issued by the Ministry of Finance of the Russian Federation (OFZ) and the ministries of finance of the constituent entities of the Russian Federation (sub-federal bonds).
Bond characteristics
- nominal value bonds (nominal). Each bond has a par value. The coupon size is determined as a percentage of the face value. Most bonds traded on Russian stock exchanges have a face value of 1,000 rubles.
- Market price. In addition to the face value, each bond has its market price. Unlike the face value, the market price is constantly changing depending on the current situation in the interest rate market, demand and supply of bonds on the stock exchange. The market price is determined on the exchange during the trading process. The market price is quoted not in rubles, but as a percentage of the face value of the bond. And it can be both higher (for example, 101.2%) and lower than the nominal value (98.7%). This price is also called the net price of the bond.
- Bond Coupon is the interest payment on the bond. The size and dates of coupon payments are usually known to the investor in advance. The coupon size is determined as a percentage of the face value.
- Depreciation is the payment of debt on bonds through regular payments.
The borrower resorts to depreciation in order not to find a significant amount of money on the maturity date, for example, the face value of bonds.
Bonds are considered less risky than stocks, but at the same time, there are both external risks that affect the activity of the issuing company, and internal events that affect the price and, consequently, the yield of bonds. Bond prices may change depending on macroeconomic events and events affecting the activities of the company - issuer.
Credit risk of bonds is the risk of non-payment or delay in payment of coupons and/or the principal amount of a bond. Depending on the level of risk of an issuer, rating agencies assign certain reliability ratings to issuers.
Market risk of bonds is the risk of a change in the value of a bond as a result of changes in the value level or volatility of the current market yield.
Taxation- the tax rate on the income of individuals of residents of the Russian Federation is 13%. Taxation of transactions with securities is regulated by Article 214.1 of Part 2 of the Tax Code of the Russian Federation.