VIII.2. When are bonds interesting? FLB – federal loan bonds.

Above in our book we have already considered many tools of the financial world. Why do we need to pay attention to bonds as well?

Firstly, there is a debtor who will regularly pay you the promised payment within the period specified by him. This is the so-called “coupon income”.

Secondly, there are situations when bonds lose their value significantly (technical default of other bonds of this issuer), and it is possible to buy debt obligations at a cheap price, while maintaining the amount of coupon income.

FLB – federal loan bonds, where the borrower of the funds is the state, i.e., FLB -bonds of the federal loan are of the greatest interest. You will receive coupons and face value anyway. Let’s consider an example of the FLB in Fig. 201.

Fig.201. Types of FLB presented on the Moscow Stock Exchange.

In Fig.201, of course, we are attracted to the FLB 29010 instrument with a coupon rate of 14.63% per annum. Let’s look at it in more detail in Fig.202, 203.

Fig.202. Chart of price changes for FLB 29010 bond.

So, what is important for us to know about this bond FLB 29010.

1. Maturity date 06.12.2034

2. The nominal value of 1000 rubles. This means that on 06.12.2034 the state will refund you 1000 rubles for each purchased bond. The current price is 110.32% (see Fig.202), which means the price of 1103.2 rubles (1000×110,32/100). This means that if you buy bonds at 1103.2 rubles now, in 2034 you will get guaranteed 1000 rubles apiece for them! This is important, this is the main thing in bonds. So we are interested in buying such bonds when they fall below the face value. Yes, this is the most interesting thing about bonds: to get both a coupon income and the difference between the purchase price and the nominal value. Figure 204 shows an example FLB 26218, which on 21.03.22 had a cost of only 729 rubles apiece! What happened then – you can see for yourself on the chart – it began to cost 1000 rubles again. 3. The frequency of coupon payment 2 times a year, the coupon rate is 14.63%, the coupon amount is 72.95 rubles per purchased bond! The payment schedule is shown in Figure 205. Well, you’re already falling in love with bonds?

Fig.203. Parameters of the FLB 29010 bond.

Fig.204. FLB 26218.

Figure 205. Coupon payment schedule for FLB 29010 bonds.

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