Nizhny Novgorod. November 12. NTA-Volga region - How to choose OFZ bonds: increasing the efficiency of investments. Key parameters for choosing OFZ: increasing the efficiency of investments.
Few people are satisfied with the profitability of bank deposits. When you contact a broker, you will likely be asked to invest in bonds. OFZ are federal loan securities issued by the Ministry of Finance of the Russian Federation. They are traded on the Moscow Stock Exchange and are presented in various versions.
Buyers of securities can be domestic and foreign investors. Upon expiration of the bond's term, the holder is paid an income. If a person purchases an OFZ on the first day of its issue, they pay attention exclusively to the coupon. Those who bought a bond a little later are guided by such a parameter as the yield to maturity - the lender’s profit from the purchase period to the maturity period.
What is OFZ-AD?
Federal loan bonds with debt amortization (OFZ-AD) are ruble bonds that are issued by the Ministry of Finance of the Russian Federation and imply periodic repayment of the principal amount of funds that were borrowed from the investor. Such bonds are coupon bonds, so the issuer pays interest payments using special coupons. If there are some OFZs, their owner, within a certain period of time, can receive the amount as a partial repayment of the face value.
OFZ-AD are one of the types of bonds that are considered the least liquid of all debt securities operating on the Moscow Exchange.
Investors who purchase them receive a variable coupon income. The face value of the bonds is redeemed over a certain period of time by payments of a set amount of cash.
Contact a broker for help
If an investor has difficulty choosing the type of security, he turns to a broker. Together with an employee of the BCS Broker company, types of assets are selected. The OFZ repayment terms are discussed with the client. Be sure to select the optimal moment to purchase a security, allowing you to receive benefits. During cooperation, the BCS agent focuses on the key parameter for choosing a bond - the coupon.
Some financial market traders do not want to spend time on consultations at all. They simply issue an order to their broker to purchase the necessary investment instruments using money from the IIS.
Who issues amortizing bonds?
The issuer of OFZ-AD is the Ministry of Finance of the Russian Federation. But, if we talk about debt amortization bonds in general, they are issued not only by the state, but also by municipal institutions, as well as the corporate sector, any enterprises, even small ones.
It is not just profitable to issue an issue when it is necessary to attract a large amount of money from outside for the development of the organization. But only if it is much more convenient and profitable for them to repay the debt in parts rather than the entire amount. For example, amortization bonds are especially often used by companies that make money from the retail trade of manufactured goods.
It is worth noting that municipal bonds are issued much more often than corporate bonds , so investing in them is much easier and more reliable: you can select securities with the most suitable parameters, and then receive money using coupons after a short period of time and invest it back.
OFZ options
Among the variety of securities, it is difficult for a beginner to decide on the choice of OFZ. Variable-income, fixed-income, and inflation-rate bonds are considered to perform well in certain market situations. What type of coupon should I choose? Let's be guided by the advice of practicing investors and brokers of the BCS Broker company.
Types of popular bonds:
1. OFZ-29012-PK. The mark “PC” means a variable coupon. The rate assumes the summation of the arithmetic average percentage value at the RUONIA rate for 6 months and 0.4% of RUONIA. As a rule, the yield on such an investment asset corresponds to the key rate of the Central Bank. This option is more suitable for crisis situations. If the economy improves, RUONIA (short-term interbank lending rate) will increase, which means the bond yield will increase.
In a situation where the OFZ rate begins to decline, the premium on it decreases. Today the yield is plus 10% of the nominal value. If you sell a security early, you may incur a loss from exchange rate differences.
Today, the advantage of this type of bonds is that they demonstrate a return higher than a bank deposit (at 9%). Deposit rates in banks are gradually beginning to decline (this trend is possible in the future), so with the help of bonds you will be able to fix your income. In addition, this investment instrument is more reliable than a bank deposit.
2. OFZ-26220-PD or OFZ-26211-PD. They have a fixed income of 7.4 and 7%, respectively. Since their purchase price is different, the efficiency of the investment instrument is approximately the same - 6% per annum. But if another crisis occurs in the country during this period, this level of profitability will look boring.
3. OFZ-46022-AD. The mark “AD” indicates that this is amortization bonds, the repayment of which is made in installments. The received part of the money will have to be reinvested, which is not entirely convenient for IIS. In addition, such investment assets do not have the same degree of liquidity as PC or PD.
4. OFZ 52001—IN. This is an indexed denomination. Today, such a bond offers a fixed rate of return of 2.5% per year. In addition, the bond's face value is indexed to the percentage of inflation. This version of the OFZ is relevant in the event of a rapid rise in inflation, since it guarantees the holder of the security protection of funds from price surges. Issued for a period of 6 years.
By choosing floating rate securities, you can protect your investment in the event of a crisis, but you will not be able to withdraw the guaranteed return on them.
PD bonds promise a good return upon repayment, which will certainly cover the inflation rate. An investor always has the opportunity to sell an asset ahead of schedule. A few months before maturity, its value will be close to its face value, and the broker’s commission will be insignificant. Such OFZs are characterized by high liquidity.
The Bank of Russia assures that the coupon yield on OFZ “PD” will soon decrease to 6.5%. If you trust the main bank of the country, then feel free to purchase assets. But if inflation starts to rise, part of the coupon income will be eaten up.
Profitability calculation
The coupon of this type of bond is constantly changing, in addition, part of the par value may not cover every coupon payment.
This makes it very difficult to calculate the yield of such bonds. It makes sense to look at the stated annual interest rate if you buy a security on the issue day and plan to hold it until maturity. If it is already in circulation, which is most likely, then the QUIK terminal and the rusbonds website (in the “Yield” tab) will show you the calculated yield to maturity.
If you plan to buy them for a short period (relative to the life of the entire bond, for example, 2 years is also short), then you will have to carefully count each payment separately manually, adding everything up gradually to get two figures: how much you invested and how much you will receive. And from this you can calculate the annual percentage.
Pros and cons of the release
A clear advantage of issue 26217 is reliability: coupons of 7.5% per annum are paid regularly and twice a year. Confidence in the asset is confirmed by the reputation of the state: there has not yet been a case of delay or non-payment of coupons by the issuer over the past 20 years for all of its obligations.
A significant advantage of the instrument is the very convenient lot size - 1000 rubles, which makes OFZ 26217 accessible to investors with small accounts.
A small minus is the decreased yield to maturity. The value of the Central Bank as of November 1, 2019 is 102.75% of the nominal value. This reduces the profit of OFZ series 26217 to 5.93% per annum.
When is it profitable to buy?
Many people involved in investing in securities believe that this type of investment is not very profitable. If they are held throughout the entire circulation period, the real coupon yield turns out to be an order of magnitude lower compared to securities without depreciation.
For example, government bonds with debt amortization (OFZ-AD) are so unpopular with investors that the Ministry of Finance will likely gradually stop issuing new ones.
But they can also be used profitably. In the case of OFZ-AD, it is profitable to buy them at a time when a significant increase in interest rates is predicted. In this case, the bond owner will regularly receive part of the par value, thanks to which he will be able to reinvest the freed money in new bonds with a high coupon interest.
Generally speaking, it is profitable to buy bonds with amortization even in “peaceful” times, if for some reason (maybe not even investment), you need some of the money. Payments of part of the face value solve this problem, without having to sell them.
This video, starting from the 4th minute, talks about amortization bonds and discusses the process of purchasing them in QUIK.
How to calculate profit
Let's look at several bonds and try to calculate the profit on them for the conditional period.
OFZ-AD 46020
Payment of parts of the face value occurs in equal parts in the last 2 years of circulation. A fairly “adequate” OFZ with constant coupons and equal repayments. You can calculate profit for the period from the date of purchase to 02/08/2034 using OFZ-PD, and for the period from 02/08/2034 until full repayment using the scheme below.
OFZ-AD 46023
This bond pays its face value more evenly.
Let's calculate the income from investing in such a bond:
For example, we hold OFZ in the period from 20 to 24, buying 1 security for 520, where 500 is the face value, and 20 rubles. market premium and sell on July 26, 2023 for 410 rubles. We calculate the profit:
- (sale price + par value redemption) – purchase price, we get (410+100)-520 = -10
- The sum of all coupons during this period is 65.22
- Amount of coupons + difference between purchase and sale prices 65.22-10 = 55.22. This is the profit for 2 years, divide by the period in years to find out the annual profitability 55.22/2 = 27.61.
- We divide the sum of the purchase price and the sale price by 2 (410+520)/2 = 465, we obtain the average cost of the security for the period.
- We divide the annual yield by the average price of the security for the year, 27.61/465 = 0.059 or 5.9%. This will be our average annual return for the specified period, excluding reinvestment of part of the par value and coupons.
OFZ-AD 46012
Why are they being released?
Some issuers, when starting a new business or promoting an existing business, require a large sum of money, which it can only receive from investors. To raise funds, they can issue bonds for a period of, for example, five years. However, the owner of a company does not always need money for exactly five years, especially if the business is organized in such a way that profits come gradually, and there is no point in accumulating large capital in the account in order to repay the debt to the investor only at the end of the specified period.
In this case, a calculation is made of the portion of the amount that the company can regularly return to investors to pay off the debt. It should be noted that the payment schedule and their amounts are approved before amortization bonds are issued.
In fact, this option is convenient for those enterprises that understand that it will be quite difficult to collect a large amount by a specific date and it is much more convenient to allocate a certain percentage of gradually arriving income.
Where to watch episodes
On the website rusbonds.ru, by selecting Depreciation – yes, we will see all available bonds with depreciation. Don’t forget to put in the column Market sector – government.
OFZ-AD is a specific and difficult to use financial instrument, with low investor interest. It makes sense to buy such bonds only before the expected rise in interest rates, since it is profitable to invest the paid-out portions of the par value in more profitable OFZs. But even for this, not every bond with amortization will do. If interest rates are expected to rise within a year or two, and the next partial repayment of the par value is expected in 3 years, then there is no point in such OFZ-AD.
The state understands that such securities do not have high interest among investors, and over time, it reduces the number of issues of such OFZs, which makes it more difficult to choose a security with suitable conditions and maturity dates.
If you have any questions, please ask in the comments!
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How to find?
Finding depreciation bonds is not at all difficult if you use a special filter on the rusbonds website. But in order to view information about issuers and the coupon payout table, you will have to register. If you need information on OFZ-AD, then we have prepared for you a small list of securities in circulation. You can study the features of their coupon payments yourself in the “Coupons” tab.
| Bond, issue | Posting date | maturity date | Link to rusbonds |
| OFZ-46018-AD | 16.03.2005 | 24.11.2021 | More details |
| OFZ-46022-AD | 23.01.2008 | 19.07.2023 | More details |
| OFZ-46011-AD | 14.02.2003 | 20.08.2025 | More details |
| OFZ-46023-AD | 30.09.2011 | 23.07.2026 | More details |
| OFZ-46012-AD | 14.02.2003 | 05.09.2029 | More details |
| OFZ-46020-AD | 15.02.2006 | 06.02.2036 | More details |
Now we’ll show you how to find them using the above-mentioned filter.
In the screenshot, the rusbonds website filter is configured for municipal bonds with amortization
Please note that the site has a special convenient filter called “depreciation”. In addition, it is convenient to look by sector, you can select only government ones, and we will get a few OFZ-AD, but if you choose municipal or corporate, then you will have plenty to choose from. There are many of them produced. Also remember to put in the filter only those papers that are “in circulation”.
conclusions
Thus, when you invest in bonds, do not forget about the two components of income - the coupon and the difference between the sale price and the purchase price. As a rule, coupon income can always be predicted, but with exchange rate differences things are somewhat more complicated. Long OFZ-PD bonds remain an attractive investment instrument, allowing you to obtain income above the average for OFZ. Securities for a short period allow you to lock in profits above the return on the deposit and forget about them until maturity.
For those who have difficulty choosing securities, it is best to contact a trusted broker. Based on the analysis performed, such an agent will create for you an investment portfolio consisting of the most profitable OFZs.
*As an advertisement. 12.11.2019 — 15:53
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Other issues of the issuer
| Name | Profitability | Price | Years to maturity | Coupon, rub | NKD, rub | Coupon payment date | maturity date |
| OFZ 24020 | 0.0% | 99.82 | 1.2 | 0 | 2.75 | 2021-07-28 | |
| OFZ 24021 | 0.0% | 99.102 | 2.9 | 0 | 2.75 | 2021-07-28 | |
| OFZ 25083 | 5.4% | 100.9 | 0.6 | 34.9 | 29.72 | 2021-06-16 | |
| OFZ 26207 | 6.7% | 107.2 | 5.7 | 40.64 | 22.11 | 2021-08-11 | |
| OFZ 26209 | 5.7% | 102.2 | 1.2 | 37.9 | 24.99 | 2021-07-21 | |
| OFZ 26211 | 5.8% | 102.047 | 1.7 | 34.9 | 21.67 | 2021-07-28 | |
| OFZ 26212 | 6.9% | 101.324 | 6.7 | 35.15 | 21.82 | 2021-07-28 | |
| OFZ 26215 | 6.0% | 102.289 | 2.3 | 34.9 | 17.64 | 2021-08-18 | |
| OFZ 26217 | 5.2% | 100.553 | 0.3 | 37.4 | 18.91 | 2021-08-18 | |
| OFZ 26218 | 7.2% | 110.62 | 10.4 | 42.38 | 11.64 | 2021-09-29 | |
| OFZ 26219 | 6.7% | 105.013 | 5.3 | 38.64 | 12.1 | 2021-09-22 | |
| OFZ 26220 | 5.7% | 102.555 | 1.6 | 36.9 | 32.85 | 2021-06-09 | |
| OFZ 26221 | 7.2% | 104.732 | 11.9 | 38.39 | 9.07 | 2021-10-06 | |
| OFZ 26222 | 6.3% | 102.593 | 3.4 | 35.4 | 5.64 | 2021-10-20 | |
| OFZ 26223 | 6.2% | 101.002 | 2.8 | 32.41 | 13.89 | 2021-09-01 | |
| OFZ 26224 | 7.0% | 100 | 8.0 | 34.41 | 31.95 | 2021-06-02 | |
| OFZ 26225 | 7.2% | 101.15 | 13.0 | 36.15 | 34.96 | 2021-05-26 | |
| OFZ 26226 | 6.7% | 106.095 | 5.4 | 39.64 | 7.84 | 2021-10-13 | |
| OFZ 26227 | 6.3% | 103.341 | 3.2 | 36.9 | 24.33 | 2021-07-21 | |
| OFZ 26228 | 7.1% | 104.748 | 8.9 | 38.15 | 6.08 | 2021-10-20 | |
| OFZ 26229 | 6.5% | 102.906 | 4.5 | 35.65 | 0.2 | 2021-11-17 | |
| OFZ 26230 | 7.3% | 105.3 | 17.9 | 38.39 | 9.07 | 2021-10-06 | |
| OFZ 26235 | 7.1% | 92.148 | 9.8 | 29.42 | 9.21 | 2021-09-22 | |
| OFZ 26236 | 7.0% | 93.747 | 7.0 | 30.61 | 29.67 | 2021-05-26 | |
| OFZ 29006 | 5.0% | 101.301 | 3.7 | 26.78 | 15.6 | 2021-08-04 |
