The best OFZ bonds to buy now. Types and features

In this article we will briefly examine the topic of bonds. Briefly - because the topic is so vast that you can talk about it for hours. It would seem that these are just bonds, but in order to really competently manage a debt portfolio, you need to understand and analyze a huge amount of information.

The most introductory information is presented in the article at the link

Today we will analyze the situation a little more. So, the first thing worth focusing on is the principle by which securities are issued on the debt market and how this affects our profitability. How to select securities based on current market conditions.

Disclaimer

All bond information below does not constitute individual investment advice. I am not advocating buying or selling bonds. You should include securities in your portfolio depending on your goals and objectives.

The price of bonds is constantly changing depending on supply and demand. Therefore, the numbers indicated in the review may not coincide with the real ones. Prices are current at the time of writing the review.

The price of a bond on the market is shown as a percentage of its face value. For example, a price of 99.96% means that with a par value of 1000 rubles, the bond costs 999.6 rubles.

You also need to take into account that when purchasing a bond, you pay the NKD to the previous owner. The closer to the maturity date, the higher the income tax. In the table, I placed the size of the NKD next to the denomination. The final price of the bond: market price + cash income + broker commission + exchange commission.

Let me also remind you that from 2021 all coupons on all bonds are taxed at a rate of 13%, so the actual net coupon yield will be lower than the estimated one.

The yield to maturity is indicated as effective – i.e. implying reinvestment of coupons. The simple yield to maturity will be slightly lower.

Risk premium

There is always risk involved in any investment. Somewhere there is more, somewhere less. When deciding to purchase certain assets, you will consider all possible dangers and want to minimize them. The main tool for minimizing possible losses is receiving a risk premium.

This concept refers to the profit that is due to the investor in excess of the income and face value of his bonds, even if they have a zero risk level. By the way, there are practically no such securities on the Russian market. Investing in most domestic assets could hypothetically lead you to ruin. Investments in federal loan bonds and deposits of some large banks have minimal risk.

Rosselkhozbank pays a risk premium on perpetual bonds. With a coupon rate of 14.5%, the premium amount is 5% of the value of the security.

OFZ

Long

I included all government bonds with a maturity date of 5 years (i.e. after January 1, 2026) as long-term OFZs. Typically, such bonds have higher yields than short-term bonds, but are more susceptible to price changes due to unfavorable market conditions. What is the difference between long and short bonds? Read this article.

Typically, such bonds are purchased to secure good returns for a long period. With a further decrease in the key rate, long OFZs should increase in price, and their yield to maturity will decrease.

I chose long bonds without amortization, with constant income and without an offer. These are the same bonds that you can simply buy and forget about them - by the maturity date you will receive the entire declared yield.

I tabulated the results. In each table, you can sort the columns yourself by bond price, maturity date, and yield to maturity. By default, sorting by effective yield to maturity is enabled everywhere - from highest to lowest.

Short

I included bonds with a maturity in the next 5 years among the short ones (although bonds with a maturity of up to 3 years are usually called short). Unlike long bonds, short bonds are more resistant to economic shocks and fall less during a crisis. Therefore, in general, their cost does not change. However, the price for this is a lower yield to maturity.

And here’s another interesting article: What are municipal bonds, how and how much can you earn on them?

The most profitable short-term government bonds in 2021 are in the table below.

Investing in Rosselkhozbank

Rosselkhozbank offers not only placement of funds on deposits, but also brokerage services. With its help you can access the main sections of the Moscow Exchange, as well as the over-the-counter market.

RSHB provides services for maintaining a standard brokerage account and IIS. Among its advantages are:

• high reliability;
• availability of its own trading platform RSHB Broker;
• no additional commission for accepting orders over the phone;
• low commissions.

The amount of the broker's remuneration for a transaction made by a client on the main market of the Moscow Exchange depends on the tariff plan and turnover per day. When connecting to the service under basic conditions and a trading volume not exceeding 100 thousand rubles. per day, 0.05% of the contract amount is withheld. For comparison, in other companies this value can reach 0.3%.

For a long time, the main disadvantage of this broker was considered to be the inability to carry out transactions on the currency section of the Moscow Exchange. This limitation was removed only in February 2021. Today, among the inconveniences of Rosselkhozbank are:

• lack of access to the St. Petersburg Stock Exchange;
• inability to trade from a single account in all available sections;
• repeated complaints from novice investors about the impossibility of opening an account remotely, despite the fact that such an option is stated on the broker’s website.

Rosselkhozbank is not one of the leading Russian brokers. For example, according to the results of March 2021, Sberbank exceeded it in the number of active clients by 170 times.

Municipal bonds

Most municipal bonds (with the exception of literally 2 issues) are traded with amortization - i.e. The issuer gradually repays the body of the bond. Due to this, the bond yield gradually falls, since the coupon is paid as a percentage of the current par value.

When the key rate decreases, investing in bonds with amortization is not the best idea, since the profitability of such securities gradually decreases, and the freed-up money has to be invested somewhere else. If your plans include “buy and forget,” then such bonds are not suitable for you.

On the other hand, amortization is good for corporate bonds - you will gradually return capital and reduce the risk that the default of one issuer will cause significant harm to your portfolio.

In general, the yield to maturity of municipal bonds is higher than that of OFZs – and at a comparable level of risk. Therefore, such bonds may be more interesting.

The most profitable municipal bonds in 2021 are in the table.

Corporate bonds

State and quasi-state companies

The table below includes bonds of state-owned companies (i.e. those in which the state owns more than 50% of the shares) and quasi-state (in the capital of which the state participates indirectly - through parent companies or organizations).

And here is another interesting article: VTB overnight bonds - what are they and is it worth investing in them?

I also classified Gazprom as a state-owned company (although in fact the company is private), since it is one of the natural monopolies and is in fact directly controlled by the state (through Miller).

As elsewhere, the sample contains bonds without an offer, without amortization, and with a constant coupon.

The yield of such bonds is higher than that of OFZ: from 5.08% to 6.64%.

Moscow Exchange share bonds

This sample contains bonds of companies that are listed on the Moscow Exchange, without reference to any echelon, as well as “subsidiaries” of such companies (for example, Segezha is a subsidiary of AFK Sistema, which is traded on the exchange).

The level of risk, in my opinion, for such bonds is slightly higher than for bonds of state-owned companies, but in general such securities are quite reliable. The probability of default by MTS, Magnit or MRSK CPU, in my opinion, is very low. But at the same time, such securities have a “tasty” yield to maturity – from 4.94% to 6.49%.

So, the most profitable corporate bonds in 2021 are the following:

OTC company bonds

Next on the list of the most profitable bonds of 2021 are bonds of over-the-counter companies with a fairly high credit rating. These are bonds of companies such as Uralkali, Eurochem, Megafon, Rosbank, etc.

The average yield of such bonds is from 4.32% to 6.52%. They all have different credit quality, so you should be more careful when choosing the right ones.

And here’s another interesting article: Review of the VBTH mutual fund: how to invest in the American debt market

VDO

The list of the most profitable bonds of 2021 is completed by VDO (high-yield bonds). Here are the highest coupons, low bond prices and high risks. Accordingly, the yield to maturity is also maximum – from 8% to 13.41%. The credit quality of issuers is also very different, so you need to analyze VDOs for inclusion in your portfolio especially carefully. If you want to become a pro in this matter, take a training course.

The list of the highest-yield bonds for 2021, as elsewhere in the review, includes papers without amortization, offers and with constant income. Therefore, the profitability of such an investment can be calculated literally down to the penny.

I hope that the information was useful to you, and you will be able to add the most profitable bonds to your investment portfolio with the level of risk that suits you and the credit quality of the issuer. Write what you think about bonds in 2021, good luck, and may the money be with you!

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