How to sell bonds in 2017

Video: Bonds explained - Buying and selling bonds on the secondary market 2024, July

Bonds are debt securities, the owner of which has the right to receive from the issuer at a predetermined date its value at face value - both in money and in the form of other property. From an economic point of view, a bond resembles a medium or long term loan. So is it worth selling the bonds you have in your hands, or is there no need to rush it?

Instruction manual

It is more correct to raise the question not about how to sell bonds, but when exactly to sell. Sometimes it is more profitable not to sell this type of securities, since regular payments on bonds can themselves be a source of additional income. So you can just wait for the maturity of the bond. However, in this case you take a certain risk, because inflation can depreciate the face value of a security.

First of all, the risk of depreciation concerns those bonds whose validity expires in 5-7 or more years. You can reduce the risk if you purchase one-year coupon or discount bonds.

You can redeem the bond ahead of schedule, without waiting for the time set by the issuer. A company acting as a debtor redeems securities at par, that is, at the amount indicated on the bonds. Often, an early repurchase is initiated by the debtor himself, so as not to pay interest. The possibility of early repayment is usually indicated in bonds.

There is another way to part with a bond - to convert it into stocks. However, not all bonds allow this to be done. When converting bonds into shares, the owner will lose interest, since he will become one of the co-owners of the enterprise, and the money will go to its development.

Bonds can sometimes act as collateral, like a bill of exchange. So, apartment bonds from the developer are provided by square meters, not money. It is quite possible to sell such bonds, but only through the exchange and with the obligatory notification of the developer.

A simple sale of bonds is also possible. As a rule, this is done when deposits with more favorable interest appear in banks. In this case, the proceeds from the sale of bonds can be directed to a deposit. The sale procedure is practically no different from the purchase: you must instruct the broker by phone or put up a bond for sale via the Internet. Bonds, which were last traded for a long time, can be sold with some difficulties and time delays.

The price of a bond is largely determined by the number of coupons not paid before that time and the total solvency of the issuing company. An interest bond can be sold both above and below par. Consider also the fact that bonds will fall in price when interest rates on deposits at the largest banks increase. Bonds of recent issues are usually sold at face value.