full access to the corporate
and government bonds market

FAQ

• What is bond?

  The bond is a debt security, under which the issuer is obliged (depending on the terms of the bond) to pay the holders interest (the coupons) and/or to repay the principal amount at the maturity.

• What is the difference between holding bonds and stocks?

  The bond payments are predefined. The current market bond price depends on the coupon rate, term and risk of the bond.

  The stock is the share of the company. Stock payments (dividends) depend on the future profits of the company.

  Hence, the stock prices are less predictable compared to bond prices.

• What payments do the bondholder receives?

  You receive the regular coupons (usually 4, 2 or 1 per year) to your trading account. You will receive the nominal (par value) of the bond at maturity.

• How the bond yield is calculated?

  Yield to maturity is the percentage rate of return the holder achieves if holds the bond until maturity date.

  The calculation is based on the coupon rate, time to maturity, and market price.

  It assumes that coupon interest paid over the life of the security is reinvested at the same rate.

  Yield to maturity may be considered as the equivalent bank rate the investor should get if he deposits the same amount for the same term in order to get the same profit.

  Note: In case the bond gives to the issuer the right to mature (call) it in several various dates (callable and perpetual bonds) the real yield-to-maturity can’t be known in advance.

  One can calculate for the various Call dates to find the yield for various possible cases. The minimal yield among all call dates is yield-to-worst.

  The actual yield estimations for some bonds is available here.

• How to evaluate the bond risk?

  The rating agencies issue the credit ratings for many bonds. Higher or lower rating depends on how the rating agency estimate the credit risk of the bond.

  The ratings change from time to time, as the risk of the issuer changes.

  The examples of bond ratings and their meanings are available here.

• How to read the bond quotes?
  The bonds quotes (prices) are traditionally in % of the nominal value, and they don’t include the Accrued Interest.
• What is Accrued Interest?

  Accrued Interest is the part of the future coupon accrued for the days since the previous coupon.

  When the investor buys the bond, he pays the market price (ask) and the accrued interest.

  When the investor sells the bond, he receives the market price (bid) and the accrued interest.

  The recent accrued interest for some bonds can be seen here.

• How to calculate the minimum investment amount?

  (Ask Price % / 100 * Par Value + Accrued Interest) * minimal quantity of securities.

  The bond parameters for this formula and the actual minimal investment amounts are available here.

• How much will I pay for the bond purchase?

  (Ask Price % / 100 * Par Value + Accrued Interest) * quantity of securities.

  The bond parameters for this formula are available here.

• How to trade bonds in MT5 Global trading platform?
  Please open the MT5 Global account (if you did not before) read the instructions here.