Hello! I want to tell you about an important component of an investor - the bond part of the investment portfolio. I've talked about bonds more than once: about that, what bonds do I buy, how to build bond strategies, what to look out for, what is stupid at low rates, like now, invest in long bonds.
How to calculate bond yields?How to calculate bond yields?
At the time of writing this post, bonds borrow 44,8% in my IIS. They lie there along with the stocks, that I talk about in my diaries IIS. If you look at my consolidated portfolio, then the share of bonds in investment assets - 32,72%. Therefore, it is very important to keep track of this part of the portfolio and not let it drift..
As many people know, now I only buy short corporate bonds with maturities of up to six months. This is protection against changes in the key rate upward., so that if something happens not to wait for a long maturity and "change shoes" in higher-yield bonds in accordance with the economic situation.
Even though buying short bonds, I try to squeeze the maximum profitability out of them. Who has been with me for a long time, knows, that I love to "squeeze" the juice out of investments.
Here and here, buying short bonds, I enter data on them in my Excel bond yield calculation table and get data on yield to maturity. Here everyone will say in unison, that this data is easy to get on sites like Rusbonds, Cbonds, SmartLab, etc.. and you will be right. But the counter of the table is different.
The fact, what you can learn with it not only the yield to maturity, which is easy to recognize on many services, but also the current profitability. What does it mean? This means, that when you buy a bond, you have two yields:
1. To maturity
2. Current (if you sell to maturity)
The first does not change and remains constant from the moment the bond is purchased until maturity.
The second one changes every day depending on the period, accumulated coupon income (NKD) And, most important, - from the bond price. For example, it can happen like this, that after buying a bond, the price will change due to various reasons - coronavirus, good company report, change of rates, etc..
If this is a positive factor, then you can use this and sell the bond to maturity and get a higher yield. Higher yield compared to yield to maturity can be obtained even if you sell the bond at a lower price, than bought. This is influenced by the factor of the term and NKD. This is the difference between bonds and stocks., where everything depends only on the price and everything is already clear.
Therefore, in order not to mislead myself, I often check the data on my current yield on a specific date for a specific bond using my table.. In other words in front of me 2 Numbers: yield to maturity and yield, if i sold a bond today.
So if today's yield exceeds the yield to maturity, then it is logical and obvious, sell a bond, without waiting for its repayment. In this way, even from short bonds the maximum yield is squeezed out. I've already squeezed the most out of bonds like Volzhsky 2014, Karelia 17, Tomsk. reg. 5. You can compare in the following picture in the carousel the yield of these bonds to maturity and that yield, which I ended up with.
Calculating the yield on bondsCalculating the yield on bonds
Bond RSHB BO-8R, if you look at the table, I held to maturity and received the corresponding yield.
Bonds, highlighted in green, while in my portfolio. I updated the data on them as of the date this post was published. As you can see, while the current profitability for all of them is higher, than to maturity. Obviously, that you need to sell the EvrChem bond, because. it will be extinguished soon (26.05.2020) and the profitability will be only 6,98%, if I sell now, then I'll get 8,03%. How's the difference? Cool.
Change in the price of bonds to maturity Change in the price of bonds to maturity
