Consider the features of bonds with structural income, their risks and benefits.
Bonds with structural income, in fact, are one of the options for structural bonds. However, they are different from this broader concept..
Features of bonds with structural income
1. Allow the investor to receive regular income in each reporting period and additional income under certain conditions.
2. The conditions are directly related to the underlying asset of the bond, which can act:
a) inflation rate,
b) precious metals futures prices, oil,
c) stock or bond prices, traded on the Russian stock exchange (except papers, intended only for qualified investors),
d) exchange rate, established by the Bank of Russia,
e) stock index (for example, MICEX Index).
3. Price of bonds with structural income and income on them (coupon) depend on changes in the value of the underlying assets. That is, when purchasing a bond with a structured income, the investor cannot predict with complete accuracy., what will be his income. He only knows, how the potential income is calculated, but the amount will depend on the value of the underlying asset in a particular period (also defined in product conditions).
4. The very value of a bond with a structured income is also influenced by a whole set of factors., therefore it is impossible to predict, how a change in the value of the underlying asset will affect the immediate value of the bond.
How a Bond with Structural Income Works?
A bond with a structured income has a lifespan and parameters, determining the frequency and potential amount of payments. Underlying asset (BA) Also predetermined.
Investment risks
• Risks of non-payment or improper fulfillment of coupon payment obligations of issuers / income.
• Risk of bankruptcy of the bond issuer.
• If the underlying asset does not rise in value, the investor does not receive additional income at the end of the product validity period.
Advantages of Structural Income Bonds
At the end of the application period:
• The nominal value of the bond is returned to the investor
• If the prices of the underlying asset have increased compared to the original, additional income is paid.
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