RGBI government bond index quotes: analytics and forecast

Which companies are included in the index?

Currently, the assets of the following Russian companies participate in RGBI:

• Sberbank
• Gazprom
• Lukoil
• Rosneft
• Magnet
• Tatneft
• Pole
• MTS
• Moscow Exchange
• ALROSA
• NOVATEK
• Severstal
• Surgutneftegaz
• VTB
• NLMK
• YANDEX
• Aeroflot
• INTER RAO
• Transneft
• MMK
• RusHydro
• RUSAL
• X5 Retail Group
• Gazprom Neft
• FGC UES
• Polymetal International
• TMK
• AFK System
• Raspadskaya
• LSR Group (PJSC)
• Rosseti
• Lenta Ltd
• Bashneft
• Rostelecom
• Mechel
• PhosAgro
• Unipro
• NKNKH
• Credit Bank of Moscow
• OGK-2
• SAFMAR Financial investments
• PIK group of companies
• EN+ Group.

Pros and cons of bond index funds

Pros:

• Diversification - Bonds that track the dynamics of the broader bond market offer a diversified portfolio rather than investing in a specific market sector.
• Low fees - Fund managers passively manage bond funds. Instead of beating the market, these funds try to imitate it. They require less management, resulting in low operating costs.
• Payments - Bond index funds are an ideal option for you if you want to make a living from your investment income. The funds pay interest more frequently (every month) than individual bonds, which do so on a semi-annual basis.
• Consistent and predictable income - With an index fund, your returns are representative of the broader market, so you know what you'll get. For actively managed funds, returns are volatile and unpredictable as the fund strives to outperform the market.

Minuses:

• Volatility - Since most broad-based bond index funds invest in government securities, they are very sensitive to fluctuations in interest rates.
• Performance - Bonds are generally a less risky investment, and with less risk, they provide small returns. Bond funds do not return as much as other investments of similar value.
• No Bond Advantage – The longer you hold an individual bond, the less risk there is. However, this is not the case for a portfolio of bond funds, which contains different relationships with different issue and maturity dates.

Index history

RGBI reflects the situation around Russian government bonds and gives potential investors a complete understanding of how the market is currently working. The official start date for settlements is December 31. 2002. The index was given a conditional value of 100, after which it began to change depending on the number of bonds traded on the Russian market, as well as the size of obligations on them.

Types of index

The basic government bond index RGBI is calculated using the clean price index method.

In addition to it, there are two more indices of Russian government bonds:

1. RGBI-tr. Calculated using the total return index method.
2. RGBI-g. Calculated using the gross price index method (index of “dirty” prices).

RGBI-tr is the main indicator characterizing the situation on the Russian government debt market based on the indicators of all issued bonds traded on the Moscow Exchange, taking into account coupon income. RGBI-g is a gross price method. It includes data on the prices of bonds entering the market with the condition of reinvesting coupon payments.

Cost and dynamics for all time

Proper use of the index allows a trader to predict the possible position of the Russian economy in the future and predict the overall yield of Russian government bonds. This information can be used to trade both rising and falling quotes.

RGBI's live chart shows that 2021 is off to a slow but consistent start. After the catastrophic peak of 2015, it came out of the dive, went up and reached its maximum peak in March 2018. The new collapse that followed did not become a trend, and the situation is gradually improving.

What are the best index funds?

Now you know where to buy a bond index fund, but what are your best options if you want to hold one? General bond market funds are a smart choice if you want to build a strong core holding for your fixed income portfolio. However, you need to know what types of bonds you invest in best.

Generally, bond prices move in the opposite direction of interest rates. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise.

Long-Term Bonds - Long-term bond funds are generally your best bet when interest rates fall.

Short-Term Bonds - Best option if you are looking for low relative market risk with an investment period of less than five years. They are right for you when interest rates rise.

International Bonds - You can diversify your portfolio beyond the U.S. bond market by turning to index funds that invest in foreign bonds.

Alternative Bond Types - We have niche categories of bonds, some of which are available as index funds. TIPS, tax-exempt bond and Treasury inflation-protected securities funds, are worth considering.

Bond index funds are useful tools for diversifying your investments. They can help you beat actively managed funds. However, they are managed passively, meaning that portfolio managers do not buy and sell holdings at their own discretion. Sometimes, when interest rates rise and bond prices fall, your assets lose value because the fund manager cannot sell them as actively managed assets. It is also difficult to forecast markets accurately and reliably. Because of this uncertainty, index funds are the best investment vehicles.

Note: Because index funds are highly diversified, even if they are in a specific sector, it is virtually impossible for them to lose all of their value, making them a safe investment.

Index calculation method

If you do not use cumbersome formulas and speak briefly, the RGBI calculation method involves revising the prices of bonds traded on the stock exchange in ruble equivalent. The main indicators used in the calculations are duration and yield to maturity.

The calculation base is updated in real time, which allows you to be aware of all changes in the stock market and respond to changes in the situation in a timely manner.

When determining the basis of RGBI bonds, the following are not considered:

• bonds with repurchase obligations in circulation of the Bank of Russia
• bonds with a maturity of less than a year (the date is counted from the date of the last base deposit).

There is also a liquidity limit. Bonds that do not reach the threshold indicator are not included in the RGBI.

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How and where to make money on the index

An index is the aggregate value of all of a company's tradable assets.

There are two ways to make money on the RGBI government bond index:

• collect stocks from the index in your investment portfolio
• buy a share in an ETF fund.

Traditionally, investors pay attention to the Western market. But for those who know how to trade in conditions of high volatility, it will be more profitable to create a portfolio, a large share of which is focused specifically on the Russian market.

A Caution About Forex and Binary Options

All novice investors are interested in the question of how to invest little and earn a lot. They do not think that even the statement itself is incorrect. If there were real ways to get rich quickly by moving quotes in this way, everyone would have long since moved en masse to the paradise islands.

Optimists will object: what about Forex and Binary Options? If these instruments brought real profits to all investors, the Forbes list of rich people would be published in one hundred volumes. Forex has nothing to do with bond trading. This is earnings on currency quotes, and 70 to 80% of traders lose money here.

Expert opinion

Vladimir Silchenko

Private investor, stock market expert and author of the Capitalist blog

Ask a Question

Binary options are generally a topic on the verge of scam. Here the trader is not actually trading anything at all. He, like in a casino, bets on red or black (the rise or fall of quotes) and receives a percentage reward for his bet. What does this have to do with the stock market? That's right, none. Advertising lies, don't fall for it.

Best brokers

Which broker to choose? The answer is simple - any of those who have official state registration (for example, FINAM, BKS or Kit-Finance). Foreign brokers who offer to trade not the asset itself, but only CFDs on it, are not suitable for us. First, they do not give us ownership of the asset itself. And secondly, they obey only their offshore regulator, so if something happens, look for winds in the field.

When making a choice, you can rely on the following criteria:

• availability of a state license to provide brokerage services
• minimum account maintenance fee
• depository commission (fee for holding trading assets)
• the presence or absence of a fee for using the trading terminal
• the amount of commissions for withdrawing earned money from a trading account
• fee for using leverage (for margin trading).

You can also focus on “live” reviews from clients who already have experience working with different brokers.

Reliable Russian brokers

An excerpt characterizing the MICEX Corporate Bond Index (MICEX CBI)

– How the secrets of all these young people are sewn with white thread! - said Anna Mikhailovna, pointing to Nikolai coming out. “Cousinage dangereux voisinage,” she added. “Yes,” said the countess, after the ray of sunshine that had penetrated into the living room with this young generation had disappeared, and as if answering a question that no one had asked her, but which constantly occupied her. - How much suffering, how much anxiety has been endured in order to now rejoice in them! And now, really, there is more fear than joy. You're still afraid, you're still afraid! This is precisely the age at which there are so many dangers for both girls and boys. “Everything depends on upbringing,” said the guest. “Yes, your truth,” continued the Countess. “Until now, thank God, I have been a friend of my children and enjoy their complete trust,” said the countess, repeating the misconception of many parents who believe that their children have no secrets from them. “I know that I will always be the first confidente [confidant] of my daughters, and that Nikolenka, due to her ardent character, if she plays naughty (a boy cannot live without this), then everything is not like these St. Petersburg gentlemen. “Yes, nice, nice guys,” confirmed the count, who always resolved issues that confused him by finding everything nice. - Come on, I want to become a hussar! Yes, that's what you want, ma chere! “What a sweet creature your little one is,” said the guest. - Gunpowder! “Yes, gunpowder,” said the count. - It hit me! And what a voice: even though it’s my daughter, I’ll tell the truth, she will be a singer, Salomoni is different. We hired an Italian to teach her. - Is not it too early? They say it is harmful for your voice to study at this time. - Oh, no, it’s so early! - said the count. - How did our mothers get married at twelve thirteen? - She’s already in love with Boris! What? - said the countess, smiling quietly, looking at Boris’s mother, and, apparently answering the thought that had always occupied her, she continued. - Well, you see, if I had kept her strictly, I would have forbidden her... God knows what they would have done on the sly (the countess meant: they would have kissed), and now I know every word she says. She will come running in the evening and tell me everything. Maybe I'm spoiling her; but, really, this seems to be better. I kept the eldest strictly. “Yes, I was brought up completely differently,” said the eldest, beautiful Countess Vera, smiling. But a smile did not grace Vera’s face, as usually happens; on the contrary, her face became unnatural and therefore unpleasant. The eldest, Vera, was good, she was not stupid, she studied well, she was well brought up, her voice was pleasant, what she said was fair and appropriate; but, strangely, everyone, both the guest and the countess, looked back at her, as if they were surprised why she said this, and felt awkward. “They always play tricks with older children, they want to do something extraordinary,” said the guest. - To be honest, ma chere! The Countess was playing tricks with Vera,” said the Count. - Well, oh well! Still, she turned out nice,” he added, winking approvingly at Vera. The guests got up and left, promising to come for dinner. - What a manner! They were already sitting, sitting! - said the countess, ushering the guests out. When Natasha left the living room and ran, she only reached the flower shop. She stopped in this room, listening to the conversation in the living room and waiting for Boris to come out. She was already beginning to get impatient and, stamping her foot, was about to cry because he was not walking now, when she heard the quiet, not fast, decent steps of a young man. Natasha quickly rushed between the flower pots and hid. Boris stopped in the middle of the room, looked around, brushed specks from his uniform sleeve with his hand and walked up to the mirror, examining his handsome face. Natasha, having become quiet, looked out from her ambush, waiting for what he would do. He stood in front of the mirror for a while, smiled and went to the exit door. Natasha wanted to call out to him, but then changed her mind. “Let him search,” she told herself. Boris had just left when a flushed Sonya emerged from another door, whispering something angrily through her tears. Natasha restrained herself from her first move to run out to her and remained in her ambush, as if under an invisible cap, looking out for what was happening in the world. She experienced a special new pleasure. Sonya whispered something and looked back at the living room door. Nikolai came out of the door. - Sonya! What happened to you? Is this possible? - Nikolai said, running up to her. - Nothing, nothing, leave me! – Sonya began to sob. - No, I know what. - Well, you know, that’s great, and go to her. - Sooo! One word! Is it possible to torture me and yourself like this because of a fantasy? - Nikolai said, taking her hand. Sonya did not pull his hands away and stopped crying. Natasha, without moving or breathing, looked out from her ambush with shining heads. "What will happen now"? she thought. - Sonya! I don't need the whole world! “You alone are everything to me,” Nikolai said. - I'll prove it to you. “I don’t like it when you talk like that.” - Well, I won’t, I’m sorry, Sonya! “He pulled her towards him and kissed her. “Oh, how good!” thought Natasha, and when Sonya and Nikolai left the room, she followed them and called Boris to her. “Boris, come here,” she said with a significant and cunning look. – I need to tell you one thing. Here, here,” she said and led him into the flower shop to the place between the tubs where she was hidden. Boris, smiling, followed her. - What is this one thing? - he asked. She was embarrassed, looked around her and, seeing her doll abandoned on the tub, took it in her hands. “Kiss the doll,” she said. Boris looked into her lively face with an attentive, affectionate gaze and did not answer. - You do not want? Well, come here,” she said and went deeper into the flowers and threw the doll. - Closer, closer! - she whispered. She caught the officer's cuffs with her hands, and solemnity and fear were visible in her reddened face. - Do you want to kiss me? – she whispered barely audibly, looking at him from under her brows, smiling and almost crying with excitement. Boris blushed. - How funny you are! - he said, bending over to her, blushing even more, but doing nothing and waiting. She suddenly jumped up on the tub so that she stood taller than him, hugged him with both arms so that her thin bare arms bent above his neck and, moving her hair back with a movement of her head, kissed him right on the lips. She slipped between the pots to the other side of the flowers and, lowering her head, stopped. “Natasha,” he said, “you know that I love you, but...” “Are you in love with me?” – Natasha interrupted him. - Yes, I’m in love, but please, let’s not do what we’re doing now... Four more years... Then I’ll ask for your hand. Natasha thought. “Thirteen, fourteen, fifteen, sixteen...” she said, counting with her thin fingers. - Fine! So it's over?

Interesting facts about the index

RGBI is the first domestic government bond index created almost entirely according to the Western model. It became the first instrument that simultaneously performed the following functions:

• general monitoring of the debt market
• tracking short-term price fluctuations
• price change analysis
• assessing the liquidity of ruble bonds.

Before its advent, investors received information from official reports with a long delay, which effectively deprived them of the means to make reliable forecasts of market developments.

What affects the price

Considering that the price of RGBI is almost entirely made up of the assets of companies operating in the field of fuel, energy and raw materials extraction and engaged in their export, the quotes are most influenced by the following factors:

1. Political situation in top economies (China, USA, Germany).
2. The pace of technological developments.
3. Public pressure (the psychology of a Western investor changes greatly depending on rumors and scandals voiced against Russia).

Otherwise, the price movement of RGBI follows general laws and depends on seasonality (investor activity decreases in the summer and increases in the fall), interest rates and general macroeconomic indicators.

Analyst forecast and prospects

If you look at the chart, you can see that the RGBI government bond index has finally stopped the old downward trend and started growing. Longer timeframes show that after the 2015 crisis, quotes only grew; against the backdrop of those events, the recent fall does not look so catastrophic.

Today RGBI is trading at around 137 points. This is a good result, especially against the backdrop of consistent growth in recent days. Everything clearly points to the birth of a new trend, so the Russian stock market will most likely continue to gain momentum.

However, those who want to play on growth should not forget about the dependence of the instrument on the political situation. A sudden statement from top politicians or a new package of sanctions (which most investors who do not have insider information will have no way of knowing in advance) could dramatically change the situation.

Similar indexes

An analogue of the RGBI government bond index is the MICEX corporate bond index MICEX. It is also divided into three branches, which carry out calculations using the methods of “clean”, “dirty” prices and total income. These are, respectively, MICEX CBI CP, MICEX CBI GP and MICEX CBI TR.

Forecast, analytics and prospects

Energy Minister Alexander Novak said: the OPEC committee will increase oil production. This will reduce prices, which will affect the MICEX. The MICEX index will lose value and stop growing.

Perhaps investor activity will increase in the fall and compensate for this. In summer, trading volume is lower than in other seasons.

There is another reason for optimism: the preservation of interest rates. This will help develop the country's commodity and money markets.

The US and China are negotiating tariffs. They are softening, and the global market is strengthening. This background has a good effect on the business of the MICEX blue chips: Russia has active economic relations with both countries.