Bonds are financial instruments in which the investor loans to an entity receiving in return periodical interest until the capital invested is repaid in full on a previously set date. The interest rate reflects the risk and the expectation for return of the invested capital (that is, the higher the risk connected to the issuer of the bond, the higher the interest it offers).
Indicative values result from the gathering of information from the counterparties that manifested intention to buy or sell. These values are to be interpreted as indicative at the reference date and do not constitute any commitment to an eventual value for purchase or sale. If you intend to buy a bond consider the indicative selling price presented. If you intend to sell consider the indicative buying price.
Investment in bonds gives no guarantee on the invested capital and is also associated to the risk of the issuer. Therefore it may lead to total or partial loss of the investment.
There are several risks associated with bond trading, such as: credit risk, issuer and/or guarantor risk and country risk. Payment of income and capital return is not guaranteed, being dependent (besides the features of the issued bond) on the issuer and/or guarantor having the necessary capital to meet payments.
- Interest rate risk: debt securities are subject to variation in interest rate that may affect in a positive or negative way the value of the bonds on the secondary market at a given moment.
- Exchange risk: if the securities’ currency is different from the investor’s account or chosen currency, and since it is subject to exchange fluctuations, the investment’s outcome may be increased or decreased.
- Secondary market risks: there is no guarantee on the transaction nor on the price, which may cause loss of the investment. Since there is no clearing house nor a settlement central, there is also the risk of delay in the settlement.
Payments of interest and bond redemption are conducted in accordance with the conditions stated in each issue’s prospect. Settlement only takes place upon custodian confirmation and the receipt of the amount by the issuer.
To start trading in bonds it is vital to know how the market operates. Learn more about all the procedure.
The investor defines the nominal value desired and the price, expressed in percentage. Since there is a coupon rate, when the investor buys a bond the interest from the period between the last payment and settlement shall be paid to the seller. On the next pay date, the investor will receive full interest, without prejudice of existing taxation.
Bond trading is mostly (over 95%) done Over-The-Counter (OTC).
Transactions occur online or through contracts between parties that set buying and selling prices. Whenever there is intent to buy or sell a certain bond by a private investor, Banco Best will contact several entities to achieve that goal at the best possible conditions for the Customer.