Bonds
What is a bond?
A bond is a debt security that entitles its acquirer to receive back the nominal value of the bond and interest on the nominal value of the bond from the issuer of the bond, in this case, from the Bank, within a specified period.
Issuing bonds is a way for a bank to collect funds from the public for a certain period of time.
For the client, the bond is an instrument for investing funds, just like a bank deposit.
It should be stated that bonds and bank deposits have quite a lot in common and, at the same time, differences.
Placement of bonds
Placement is the primary sale of bonds to investors, which can be carried out through the RA Stock Exchange, or by direct sales to customers by the Bank
Acquisition quantity /amount: minimum 1 bond:
The maximum investment volume is limited only by the total volume of issued bonds, no other restrictions are imposed by the Bank
Bonds are sold in whole numbers
Bond price
The price of the bond is equal to its nominal value throughout the placement period.*
However, it should be taken into consideration that the bond is sold to investors with coupons accumulated at the moment.
The investor can find the calculated price (nominal value + accumulated coupon) per each day during the placement on the Bank's website.
After listing in the stock exchange, investors can get information about the previous day's price! through a broker.
* The bond price may fluctuate in the result of interest rate changes in the market (in the opposite direction).
Sale of bonds
After purchasing the bonds, the investor cannot sell them back to the Bank.
After the primary placement, the investor can sell the bonds at any time in the secondary market.
For each tranche, the Bank signs a contract with a market maker, by which the minimum volume of daily quotation is 1 percent of the total number of bonds of the given class.
Bonds can also be sold to other persons.
Bonds can also be pledged.
Bond - Deposit comparison
Amount guarantee
Taxation of incomes
Cash flows if held until maturity
In case of premature termination /interest loss derived from the sale of bonds
Bond - Deposit comparison
Amount guarantee
Yes Investments in bonds are guaranteed by the Deposit Guarantee Fund to the same extent as in case of deposits.
Taxation of incomes
No According to the RA Tax Code, resident and non-resident individuals, as well as non-resident legal entities, interest income from bonds listed in the stock exchange are not subject to taxation.
Cash flows if held until maturity
Nominal value + accumulated coupon income
In case of premature termination /interest loss derived from the sale of bonds
No Bonds are sold with accrued interest.
Deposit
Amount guarantee
Yes
Taxation of incomes
Yes – 10%
Cash flows if held until maturity
Nominal value + accumulated coupon income
In case of premature termination /interest loss derived from the sale of bonds
Yes Basically, in case of premature termination of the deposit, the investor loses a significant part of the accumulated interest income.
Updated 14.08.2024 10:24