In the original, the expression "risk-free rate" is written as "Risk free rate", that is, a rate that is free from risk. This indicator has become quite popular in many financial transactions. Determining the rate of return available when working with one or another financial instrument with zero credit risk, the risk-free rate, however, is, in fact, a contradiction to itself - there is always and in everything there is a risk. Let's figure it out.

Who does not risk does not invest

Any investor, investing money, is concerned about the profitability of his investments and the level of risk. The risk-free rate allows you to estimate the possible level of return: an investment project that brings a rate of return below the risk-free rate will not be accepted, since its risk level exceeds the risk level of risk-free assets. In this case, two characteristics become indicative for appraisal works - the direct capitalization ratio and the discount rate. The calculation of any of these characteristics requires taking into account the risk-free rate of return. It is also required when we are talking about models for calculating the discount rate - valuation of capital assets, arbitrage pricing.

By discounting we mean identifying the value of cash flows associated with potentially profitable future earnings.

The risk-free rate is divided into two types:

• common noun. This is the interest rate ratio for typical investment types with the lowest risk
• Genuine. Calculated using the existing inflation rate: Calculated on the principle of "a nominal rate minus the existing inflation parameter".

A significant number of developed countries are characterized by a low level of inflation. So, at the end of spring this year in Germany it was 0.28, in France 0.31, and in the USA 0.56. Accordingly, with such indicators, it is convenient to take the nominal risk-free rate as the base indicator. Our inflation rate reaches 7.44%, so the Russian Federation is guided by the real risk-free rate. It is used in working with any investment - business, currency, precious metals, real estate.

Estimation of the risk-free rate: the economic content of the concept

• the value of the property of the enterprise,
• profit features,
• consumption volume,
• investment features,
• discount rate.

In addition to the fact that the discount rate allows you to evaluate the potential profit, it is also an indicator of the effectiveness of investments. In fact, its purpose is to provide information on how much it is worth investing now in order to receive the corresponding cash receipts after a certain period of time. The formed indicator of the discount rate determines the subsequent volumes of investments.

Despite the fact that the main purpose of the risk-free rate is to reduce possible risks, as mentioned above, it is absolutely impossible to avoid them. These risk factors include:

• unseen circumstances,
• political circumstances,
• price spikes in the future,
• fluctuations in average levels of interest rates and their structure over time. For example, if they relate to debt documents, then they are “tied up” for a period of time until their repayment. The longer the period, respectively, the greater the risks.

Interestingly, even for these types of investments, there are ways to avoid or minimize them. For example, when an investor, having calculated the risk of non-payment, sells securities ahead of schedule, thereby making a profit from a purchase and sale transaction. When there is little risk, the bonds are held by the investor and redeemed at the appropriate time.

The West does not experience any particular difficulties in determining the risk-free rate - most often it assumes interest on US government securities. But in some European countries, the assessment of the risk-free rate is based on the percentage of yield on bills and bonds.

The main criteria here are three instruments - US Treasury bills, 10 and 30-year Treasury bonds. There are a number of features here:

• these assets have an appropriate long-term rate, taking into account the maximum number of potential risks
• the ten-year bond rate over the term range is largely similar to the rate of the investment portfolio of S&P500 assets. There are also a number of similarities with the risk premium and beta inherent in the specified portfolio.
• 10-year and 30-year bond rates reflect the impact of inflation differently. Thus, a ten-year bond has a lower risk parameter, but the liquidity premium of a ten-year bond is also lower than that of a thirty-year one.

Note that a number of difficulties relate to the determination of the risk premium. If an investment project expects a rate below the risk-free rate, then usually, when evaluating investments, investors include in the discount rate the so-called additional risk premium (along with the risk-free interest rate).

The risk premium can include numerous technical, industrial, industry risks, and since the discount rate is impossible without a risk-free rate, it is used in most financial models. Among them are a model for assessing the effectiveness of investment projects and a model for assessing the cost.

Definition of the risk-free rate

Before calculating the risk-free rate, it is necessary to make sure that the asset we are talking about is risk-free and has three basic properties:

• Determined return, which an investor can calculate before investing
• Minimum risk percentage related to loss of funds (including contingencies)
• Long circulation time applicable to the period of operation of the enterprise.

Risk-free securities are considered to be those that can give a guaranteed profit with a low possibility of non-payment. Meanwhile, if securities are issued by legal entities, they are in principle not capable of being risk-free. So only government papers are considered as such.

However, they also carry a number of risks.

• Reinvestment rates arise when the investor makes unexpected decisions: he invests the amount received at the end of the period of validity of the securities. The occurrence of such a risk is possible if the maturity period of the asset is less than the expected investment period.
• Interest rates, most often accompanying the period after the acquisition of the security. When a market participant makes an investment for a period shorter than the maturity of the asset, the investment is hardly risk-free. The investor has no information about the size of the rate at the time of termination of ownership of the asset.

It is still optimal to use securities that “close” the investment period by the maturity period. Please note, however, that the assessment of the risk-free rate, which in this case is necessarily made, involves taking into account two types of rates - ruble and foreign currency. Irving Fisher's formula proposed back in the 1930s is best suited here:

Rн = Rр + Jinf + Rр* Jinf

Rр = Rн - Jinf/1 + Jinf, Where

Rn - nominal rate;
Rp - real rate;
Jinf - inflation index (annual inflation rate).

To convert the ruble risk-free rate to the dollar, there are the following formulas:

Dr = (1 + Dv)*(1 + Kurs) - 1

Dv = (1 + Dr)*(1 + Kurs) - 1, where

Dv, Dr - currency and ruble risk-free rate, and Kurs - rate of exchange rate in percent.

Estimation of the risk-free rate in Russia

To work with the assessment of the risk-free rate in the Russian Federation, five tools are used:

1. Bonds of Russia state standard, in two equivalents

• currency. OVVZ (internal currency loan) and Eurobond (use outside Russia)
• ruble. This includes GDOs (bonds with a loan for 30 years), OGSS (short-term debt securities of the state sample), GKOs (the most demanded, with a short-term character), OFZ, or federal loan bonds, and bonds of the Central Bank of the Russian Federation

2. Refinancing rate of the Bank of Russia. It represents the corresponding percentage, under which the Central Bank of Russia gives loans to other financial and credit enterprises under the refinancing program. It is significant in terms of raising capital and its subsequent placement. In accordance with the law of the Russian Federation, lending by the Central Bank is possible for up to 6 months, so there is no need to talk about the absence of risk. Over the past three years, the refinancing rate in Russia has remained at around 8.25%.

3. rates on interbank loans. These include MIACR (the average interest rate for the volume of actual transactions for the provision of interbank loans by commercial banks), MIBOR (the approved annual interest rate announced by large financial enterprises in Moscow during the procedure for selling interbank loans), MIBID (the average annual interest rate at which large banks of Moscow are guided by the purchase of interbank loans). A common drawback of interbank rates is their fragility, in addition, the risk-free rate assessment procedure also takes into account the risk of default on the loan, respectively, this percentage is incorrect in the work.

4. bonds of a number of Western countries, LIBOR, look very promising. One of the most considered options is the LIBOR rate of the London interbank market, however, it is short-lived, and therefore doubtful in operation. In this regard, 10-year US bonds with an upward yield of 2.21%, Great Britain (1.98%), and Japan (0.37) are more reliable.

5. deposits of the most reliable banks in Russia. The rates here should be applied taking into account 2 points - the term of deposits is usually limited to 3-5 years, and their risk is higher than investments in government bonds. However, they are used in the workplace. It is quite logical that Sberbank of Russia is considered the most reliable, followed by VTB, Gazprombank and VTB 24. On average, the rate ranges from 11-12% (rubles) or 7-8 (currency).

Highly specialized material for professional investors
and students of the Fin-plan course "".

Financial and economic calculations are most often associated with the assessment of time-distributed cash flows. Actually for these purposes, and need a discount rate. From the point of view of financial mathematics and investment theory, this indicator is one of the key. It is based on the methods of investment evaluation of a business based on the concept of cash flows, with its help, a dynamic evaluation of the effectiveness of investments, both real and stock, is carried out. To date, there are already more than a dozen ways to select or calculate this value. Mastering these methods allows a professional investor to make more informed and timely decisions.

But, before moving on to the methods of justifying this rate, let's look at its economic and mathematical essence. Actually, two approaches are applied to the definition of the term "discount rate": conditionally mathematical (or process), as well as economic.

The classic definition of the discount rate stems from the well-known monetary axiom: “Money today is worth more than money tomorrow.” Hence, the discount rate is a certain percentage that allows you to bring the cost of future cash flows to their current cost equivalent. The fact is that many factors influence the depreciation of future income: inflation; risks of not receiving or not receiving income; lost profit arising from the appearance of a more profitable alternative investment opportunity in the process of implementing a decision already made by the investor; systemic factors and others.

Applying the discount rate in their calculations, the investor brings, or discounts the expected future cash income to the current moment in time, thereby taking into account the above factors. Discounting also allows the investor to analyze cash flows over time.

In this case, the discount rate and the discount factor should not be confused. The discount factor is usually used in the calculation process as a kind of intermediate value calculated on the basis of the discount rate according to the formula:

where t is the number of the forecast period in which cash flows are expected.

The product of the future value of the cash flow and the discount factor shows the current equivalent of the expected income. However, the mathematical approach does not explain how the discount rate itself is calculated.

For these purposes, the economic principle is applied, according to which the discount rate is some alternative return on comparable investments with the same level of risk. A rational investor, making a decision to invest money, will agree to the implementation of his "project" only if its profitability turns out to be higher than the alternative and available on the market. This is not an easy task, since it is very difficult to compare investment options by level of risk, especially in the absence of information. In the theory of investment decision making, this problem is solved by decomposing the discount rate into two components - the risk-free rate and risks:

The risk-free rate of return is the same for all investors and is subject only to the risks of the economic system itself. The remaining risks are assessed by the investor independently, as a rule, on the basis of an expert assessment.

There are many models to justify the discount rate, but all of them in one way or another correspond to this basic fundamental principle.

Thus, the discount rate is always the sum of the risk-free rate and the total investment risk of a particular investment asset. The starting point for this calculation is the risk-free rate.

risk free rate

The risk-free rate (or risk-free rate of return) is the expected rate of return on assets that have zero intrinsic financial risk. In other words, this is the return on absolutely reliable options for investing money, for example, on financial instruments, the return on which is guaranteed by the state. We focus on the fact that even for absolutely reliable financial investments, absolute risk cannot be absent (in this case, the rate of return would also tend to zero). The risk-free rate includes the risk factors of the economic system itself, risks that no investor can influence: macroeconomic factors, political events, changes in legislation, extraordinary anthropogenic and natural events, etc.

Therefore, the risk-free rate reflects the lowest possible return acceptable to the investor. The investor must choose the risk-free rate for himself. You can calculate the average rate from several options for potentially risk-free investments.

When choosing a risk-free rate, an investor should take into account the comparability of his investments with a risk-free option according to such criteria as:

Scale or total cost of investment.

Investment period or investment horizon.

The physical possibility of investing in a risk-free asset.

Equivalence of denomination of rates in currency, and others.

Rates of return on fixed-term ruble deposits in banks of the highest reliability category. In Russia, such banks include Sberbank, VTB, Gazprombank, Alfa-Bank, Rosselkhozbank and a number of others, a list of which can be viewed on the website of the Central Bank of the Russian Federation. When choosing a risk-free rate in this way, it is necessary to take into account the comparability of the investment period and the period of fixing the rate on deposits.

Let's take an example. We use the data of the website of the Central Bank of the Russian Federation. As of August 2017, the weighted average interest rates on deposits in rubles for up to 1 year amounted to 6.77%. This rate is risk-free for most investors who invest for up to 1 year;

Yield on Russian government debt financial instruments. In this case, the risk-free rate is fixed in the form of yield on (OFZ). These debt securities are issued and guaranteed by the Ministry of Finance of the Russian Federation, therefore they are considered the most reliable financial asset in the Russian Federation. With a maturity of 1 year, OFZ rates currently range from 7.5% to 8.5%.

Level of yield on foreign government securities. In this case, the risk-free rate is equal to the yield on US government bonds with maturities ranging from 1 to 30 years. Traditionally, the US economy is assessed by international rating agencies at the highest level of reliability, and, consequently, the yield of their government bonds is recognized as risk-free. However, it should be taken into account that the risk-free rate in this case is denominated in dollars and not in rubles. Therefore, for the analysis of investments in rubles, an additional adjustment for the so-called country risk is necessary;

Yield on Russian government Eurobonds. This risk-free rate is also denominated in dollar terms.

The key rate of the Central Bank of the Russian Federation. At the time of this writing, the key rate is 9.0%. It is believed that this rate reflects the price of money in the economy. An increase in this rate entails an increase in the cost of a loan and is a consequence of an increase in risks. This tool should be used with great care, as it is still a directive, not a market indicator.

Interbank lending market rates. These rates are indicative and more acceptable than the key rate. Monitoring and a list of these rates are again presented on the website of the Central Bank of the Russian Federation. For example, as of August 2017: MIACR 8.34%; RUONIA 8.22%, MosPrime Rate 8.99% (1 day); ROISfix 8.98% (1 week). All these rates are short-term and represent the yield on lending operations of the most reliable banks.

Discount rate calculation

To calculate the discount rate, the risk-free rate should be increased by the risk premium that the investor assumes when making certain investments. It is impossible to assess all risks, so the investor must independently decide which risks and how should be taken into account.

The following parameters have the greatest influence on the value of the risk premium and, ultimately, the discount rate:

The size of the issuing company and the stage of its life cycle.

The nature of the liquidity of the company's shares in the market and their volatility. The most liquid stocks generate the least risk;

The financial condition of the share issuer. A stable financial position increases the adequacy and accuracy of forecasting the company's cash flow;

Business reputation and perception of the company by the market, investors' expectations regarding the company;

Industry affiliation and risks inherent in this industry;

The degree of exposure of the activity of the issuing company to macroeconomic conditions: inflation, fluctuations in interest rates and exchange rates, etc.

A separate group of risks includes the so-called country risks, that is, the risks of investing in the economy of a particular state, for example, Russia. Country risks are usually already included in the risk-free rate if the rate itself and the risk-free yield are denominated in the same currencies. If the risk-free return is in dollar terms, and the discount rate is needed in rubles, then it will be necessary to add country risk as well.

This is just a short list of risk factors that can be taken into account in the discount rate. Actually, depending on the method of assessing investment risks, the methods for calculating the discount rate differ.

Let us briefly consider the main methods for justifying the discount rate. To date, more than a dozen methods for determining this indicator have been classified, but they are all grouped as follows (from simple to complex):

Conditionally "intuitive" - ​​based rather on the psychological motives of the investor, his personal beliefs and expectations.

Expert, or qualitative - based on the opinion of one or a group of specialists.

Analytical - based on statistics and market data.

Mathematical, or quantitative - require mathematical modeling and the possession of relevant knowledge.

An "intuitive" way to determine the discount rate

Compared to other methods, this method is the simplest. The choice of the discount rate in this case is not mathematically justified in any way and represents only the desire of the investor, or his preference for the level of profitability of his investments. An investor can rely on his previous experience, or on the profitability of similar investments (not necessarily his own), if he knows the information about the profitability of alternative investments.

Most often, the discount rate is “intuitively” calculated approximately by multiplying the risk-free rate (as a rule, this is just the deposit rate or OFZ) by some adjustment factor of 1.5, or 2, etc. Thus, the investor, as it were, “estimates” the level of risks for himself.

For example, when calculating the discounted cash flows and fair value of companies in which we plan to invest, we usually use the following rate: the average rate on deposits multiplied by 2, if we are talking about blue chips, and we use higher coefficients, if we are talking about companies 2nd and 3rd tier.

This method is the simplest practice for a private investor and is used even in large investment funds by experienced analysts, but it is not held in high esteem among academic economists, since it allows for “subjectivity”. In this regard, in this article we will give an overview of other methods for determining the discount rate.

Calculation of the discount rate based on expert judgment

The expert method is used when investments involve investing in shares of companies in new industries or activities, start-ups or venture funds, and also when there is no adequate market statistics or financial information about the issuing company.

The expert method for determining the discount rate consists in polling and averaging the subjective opinions of various specialists about the level, for example, the expected return on specific investments. The disadvantage of this approach is the relatively high proportion of subjectivity.

It is possible to increase the accuracy of calculations and somewhat level subjective assessments by decomposing the rate into a risk-free level and risks. The investor chooses the risk-free rate on his own, and the assessment of the level of investment risks, the approximate content of which we described earlier, is already carried out by experts.

The method is well applicable for investment teams that employ investment experts of various profiles (currency, industry, raw materials, etc.).

Calculation of the discount rate by analytical methods

There are many analytical ways to justify the discount rate. All of them are based on the theory of economics of the firm and financial analysis, financial mathematics and the principles of business valuation. Let's give some examples.

Calculation of the discount rate based on profitability indicators

In this case, the discount rate is justified on the basis of various profitability indicators, which, in turn, are calculated according to the data and . The base indicator is the return on equity (ROE, Return On Equity), but there may be others, for example, return on assets (ROA, Return On Assets).

It is most often used to evaluate new investment projects within an existing business, where the nearest alternative rate of return is precisely the profitability of the current business.

Calculation of the discount rate based on the Gordon model (model of constant growth of dividends)

This method of calculating the discount rate is acceptable for companies that pay dividends on their shares. This method assumes the fulfillment of several conditions: the payment and positive dynamics of dividends, the absence of restrictions on the life of the business, and the stable growth of the company's income.

The discount rate in this case is equal to the expected return on equity of the company and is calculated by the formula:

This method is applicable to the evaluation of investments in new projects of the company, by the shareholders of this business, who do not control profits, but receive only dividends.

Calculation of the discount rate by quantitative analysis methods

From the point of view of investment theory, these methods and their variations are the main and most accurate. Despite the many varieties, all these methods can be reduced to three groups:

Models of cumulative construction.

Capital Asset Pricing Model (CAPM).

Models of the weighted average cost of capital WACC (Weighted Average Cost of Capital).

Most of these models are quite complex, requiring a certain mathematical or economic skill. We will consider the general principles and basic calculation models.

Cumulative building model

Within the framework of this method, the discount rate is the sum of the risk-free rate of expected return and the total investment risk for all types of risk. The method of substantiating the discount rate based on risk premiums to the risk-free level of return is used when it is difficult or impossible to evaluate the relationship between risk and return on investment in the analyzed business using mathematical statistics. In general, the calculation formula looks like this:

Capital asset pricing model CAPM

The author of this model is the Nobel laureate in economics W. Sharp. The logic of this model does not differ from the previous one (the rate of return is the sum of the risk-free rate and risks), the method of assessing investment risk is different.

This model is considered fundamental, since it establishes the dependence of profitability on the degree of its exposure to external market risk factors. This relationship is assessed through the so-called "beta" coefficient, which is essentially a measure of the elasticity of an asset's return to a change in the average market return of similar assets in the market. In general, the CAPM model is described by the formula:

Where β is the “beta” coefficient, a measure of systematic risk, the degree of dependence of the assessed asset on the risks of the economic system itself, and the average market return is the average return on the market for similar investment assets.

If the "beta" coefficient is higher than 1, then the asset is "aggressive" (more profitable, changing faster than the market, but also more risky in relation to analogues in the market). If the "beta" coefficient is below 1, then the asset is "passive" or "protective" (less profitable, but also less risky). If the "beta" coefficient is equal to 1, then the asset is "indifferent" (its profitability changes in parallel with the market).

Calculation of the discount rate based on the WACC model

Estimating the discount rate based on the company's weighted average cost of capital allows you to estimate the cost of all sources of financing for its activities. This indicator reflects the actual costs of the company to pay for borrowed capital, equity capital, and other sources, weighted by their share in the total liability structure. If the company's actual return is above WACC, then it generates some added value for its shareholders, and vice versa. That is why the WACC indicator is also considered as a barrier value of the required return for the company's investors, that is, the discount rate.

The calculation of the WACC indicator is carried out according to the formula:

Of course, the range of methods for justifying the discount rate is quite wide. We have described only the main methods most often used by investors in a given situation. As we said earlier in our practice, we use the simplest, but quite effective "intuitive" way to determine the rate. The choice of a specific method always remains with the investor. You can learn the whole process of making investment decisions in practice in our courses at. We teach deep analytics techniques already at the second level of training, at advanced training courses for practicing investors. You can evaluate the quality of our training and take the first steps in investing by signing up for ours.

If the article was useful to you, like and share it with your friends!

Profitable investment to you!

Federal loan bonds for individuals are high-yield securities issued by the Ministry of Finance. You can buy new OFZs of the 3rd issue in 2018 at Sberbank and VTB from March 15 to September 14.

Federal loan bonds, or, as they used to be called “state loan bonds,” are far from a new and not very popular financial instrument.

However, the news that the Ministry of Finance of the Russian Federation plans to issue a new issue of federal loan bonds for individuals produced a bombshell effect.

New OFZ-n, "people's" bonds became interested not only in advanced investors, but also in ordinary people who used to be content with opening deposits in banks.

Federal loan bonds in 2018 are presented by the Ministry of Finance as an alternative to bank deposits of individuals, since the yield of OFZ-n is comparable to the interest rates of deposits. And there is no need to talk about their reliability.

Now the OFZ-n of the 3rd issue is being placed. The first issue was sold from April 26 to October 25, 2017. The second one is from September 13, 2017 to March 14, 2018.

Let us consider in more detail the conditions for investing money in new federal loan bonds, the OFZ yield for individuals - 2018, and also tell you where and how you can buy "people's bonds" of the 3rd issue, issued since March of this year.

Federal loan bonds - 2018: yield and conditions

People's federal loan bonds are very different from those securities that are already in circulation in Russia. What are their features?

Validity of OFZ — 2018

Federal loan bonds - 2018 are issued for a period of 3 years. Individuals who bought OFZ-n will have to return them to the state in three years and receive the invested money with interest. Starting date of placement of bonds of the third issue: March 15, 2018. Redemption - March 24, 2021.

By the way, it is not necessary to run to the bank and choke in line to urgently sell bonds that day. Automatic repayment of OFZ-n at the end of the term is provided. After 3 years, the money goes to the settlement or brokerage account of the investor in the bank.

Of course, the OFZ owner has the right to hand them over to the state even earlier than three years, for example, after one year of owning bonds. But his income in this case will be much lower than after three years. Therefore, it will be unprofitable to return OFZ-n to the state in the first year after the purchase.

In a word, in order to get the maximum possible income, the owner of OFZ-2018 will need to keep them for all three years.

Yield of federal loan bonds - 2018

Federal loan bonds issued in March-September 2018 will already have relatively high interest rates.

But in order to stimulate long-term investment of money, a gradual increase in the interest rate is provided.

Rates and dates of payment of coupon yield OFZ-n of the third issue

As a result, the rate of return without taking into account commissions, as well as with the possession of OFZ-n of the third issue within 3 years before the maturity date, will be up to 7.25% per annum.

Agent banks (Sberbank and VTB) will charge a commission from the buyer, the amount of which will depend on the amount of the transaction: 1.5% - with a transaction amount of up to 50 thousand rubles, 1.0% - from 50 to 300 thousand rubles . and 0.5% - from 300 thousand rubles. Similar commissions will be charged from investors in case of presentation of bonds for early redemption.

Thus, in order to get the maximum benefit from OFZ-n of the third issue, it is necessary to purchase them for an amount of more than 300 thousand rubles and hold them until March 24, 2021.

The OFZ yield for individuals, after three years, will exceed that offered today by the largest banks in Russia.

How much are federal loan bonds - 2018

One federal loan bond for individuals, issued in March-September 2018, will cost 1,000 rubles on the first two days of placement, then the price will change depending on the market situation. The cost will be published weekly on the official website of the Russian Ministry of Finance. When an individual purchases bonds, all conditions (price and yield) are fixed and no longer depend on market conditions.

It will be possible to buy bonds of the first issue within 6 months from the date of placement, then the sale of this issue will stop and the sale of the next one will begin. At the same time, the investor will be able to buy securities in the amount of 30 thousand rubles to 15 million rubles in one issue.

Where and how to buy federal loan bonds - 2018

Federal loan bonds for individuals, which were issued in March-September 2018, can only be purchased at Sberbank and VTB.

In order to buy OFZ, you will need to come to a branch of Sberbank or VTB, open the necessary accounts there, sign an agreement and, accordingly, become the owner of the securities. Sberbank or VTB clients who have a personal account in Internet banks can do this remotely.

"People's bonds" of the 3rd issue were received by banks on March 15, 2018. Closing date for the placement of bonds: September 14, 2018.

It will be impossible to buy OFZ-2018 from intermediaries, private traders or on the stock exchange. No donation or contributions to the capital are provided. It is also forbidden to use them as collateral for obtaining a loan.

The OFZ owner will be able to sell them only in the bank where he took them, without the right to transfer them to third parties. OFZ can be transferred to another person only by inheritance. This will help avoid abuse.

Buy federal loan bonds for individuals in 2018 or not, everyone decides for himself! Learn more about the conditions for the purchase and redemption of OFZ-n in Sberbank and VTB, as well as from the information messages of the Ministry of Finance of the Russian Federation.

Today, OFZs issued by the state earlier are in circulation in Russia. These federal loan bonds are of the following types:

• OFZ-PK (with a variable coupon) began to be issued in 1995, and after the 1998 crisis, the issue was discontinued. The coupon was paid semi-annually. The value of the coupon rate changed and was determined by the weighted average yield on GKO over the last 4 sessions (trades).
• OFZ-PD (with a constant income) began to be issued in 1998. The coupon was paid once a year and was fixed for the entire circulation period.
• OFZ-FD (with fixed income) appeared in 1999. They were issued to the owners of GKO and OFZ-PK, frozen in 1998 as an innovation. The term of circulation is 4-5 years. The coupon was paid quarterly. The rate was reduced annually (30% in the first year, 10% at the end of the term).
• OFZ-AD (with debt amortization) periodic repayment of the principal amount of the debt.
• OFZ-IN (with an indexed par value) have been issued since 2015. The nominal value of the bonds is monthly indexed for the coming month in accordance with the consumer price index for goods and services in the Russian Federation.

It is federal loan bonds that can be an alternative to deposits of individuals that are losing profitability.

Yield on federal loan bonds of previous years

According to Mark Goykhman, an analyst at Teletrade Group of Companies, which he expressed to Rossiyskaya Gazeta, the population may also be interested in the Russian federal loan bonds with inflation-linked bonds (OFZ-IN) that appeared in 2015.

« A 2.5 percent yield plus inflation compensation combines the reliability and sufficient yield of these securities", - the source of Rossiyskaya Gazeta notes.

The entrance ticket to this market is available to the absolute majority - the face value of one bond is one thousand rubles.

Peramo General Director Olga Meshcheryakova also told Moskovsky Komsomolets that the best option for a newcomer is federal loan bonds or corporate bonds of the "first echelon" - the most reliable Russian companies.

“A default on such securities can only occur if Russia defaults and state corporations go bankrupt. The probability of a default in our country with the current low level of public debt is practically zero, the same can be said about issuers of the first echelon. Moreover, if we recall the default of the Russian Federation in 1998, when GKO holders suffered, we will see that even in such a difficult time for the country, the same Gazprom paid off its bonded loans, ”Meshcheryakova argues.

Where can an individual buy federal loan bonds of previous years

Since OFZs of previous years are traded on the stock exchange, it is necessary to open an investment account with a broker. You can also purchase bonds through open-end mutual funds (OPIFs) managed by large management companies.

By the way, investment and accumulative life insurance can also be distinguished among alternatives to bank deposits.

There is a small amount for investment - in the region of 300 thousand rubles. Every month I can replenish this amount by about 20 thousand. Investment term - 5-6 years. As one of the options I consider OFZ.

I heard that if relations between the US and Russia worsen, the next sanctions may affect the OFZ. So far, the United States has not imposed sanctions against Russia's public debt, but news about this periodically pops up. If this does happen, what can happen to the purchased bonds?

Andrey, OFZ is one of the most reliable ways to invest money. Even in the event of sanctions against Russian public debt, something bad is unlikely to happen to your investments. I explain why OFZ can be trusted, but first let me remind you what it is.

Evgeny Shepelev

private investor

What is OFZ

We wrote in detail about OFZ in our article, so I'll tell you briefly.

The government always needs money, and one way to get it is to borrow money by issuing federal bonds. Investors buy OFZs and receive coupon income (interest) from the Ministry of Finance, and then the face value of the bonds is returned to them.

OFZ types

Bonds have different maturity dates and different yields. In addition, they differ in the type of coupons.

With a permanent coupon (OFZ-PD). This is the most popular type of bonds. The size of all coupons is known in advance and does not change until redemption. An example is OFZ 26205.

With a fixed coupon (OFZ-FD). The size of all coupons is also known in advance, but may vary. For example, in the first year of circulation, the coupon can be 7%, in the next year - 8%. An example is OFZ 46011.

With a variable coupon (OFZ-PK). The coupon changes over time and depends on the RUONIA rate - it will not be possible to calculate the yield to maturity in advance. An example is OFZ 29012.

Not all bonds have a fixed par value. For OFZ-AD, it is depreciated - redeemed in parts, while for OFZ-IN, the face value is indexed in accordance with inflation.

OFZ returns and risks

OFZ yields are usually at or slightly higher than those of bank deposits. For example, OFZ 26214, which will be redeemed in May 2020, has an effective yield to maturity of approximately 7.3% per annum. Generally, the longer the time to maturity, the higher the OFZ yield.

You can earn more if - 13% of the amount invested in IIS, but not more than 52,000 R per year.

The solvency of the Ministry of Finance of the Russian Federation now raises no questions for anyone. However, there are fears that the US will impose sanctions against the Russian public debt and this will somehow affect investors who own OFZ.

If you want to receive passive income from bonds, pay attention to the coupon dates. For monthly income, you will need to have at least six different OFZs in your portfolio, since the coupon is paid every six months. For example, OFZ 26212 coupons come in January and July, OFZ 26215 - in February and August, etc.

In summary: pros and cons

Investing in OFZ through a Russian broker is a completely safe investment option. Even if the US imposes sanctions against the Russian government debt, the OFZs will not disappear, the coupons on them will be credited to your account, the face value will be redeemed in due time.

Of the minuses, of course, the yield is not much higher than on deposits. If your investment horizon is 5-6 years and you have the ability to regularly deposit money, consider also including a small amount of stocks in your investment portfolio, or better, stock indices. In the long run, the potential return of stocks is higher than that of bonds. True, there are more risks.

If you have a question about personal finances, expensive purchases or a family budget, write to: [email protected]. We will answer the most interesting questions in the magazine.

Federal loans are debt securities issued by the Government of the Russian Federation represented by the Ministry of Finance. They are considered the most reliable instrument in the Russian financial market: the OFZ interest rate is often used as a risk-free one. Anyone can become the owner of securities - individuals and legal entities, Russian and foreign citizens.

Benefits of investing in OFZ

• Reliability. Since the issuer is the state itself, federal loan bonds are considered a model of risk-free assets among Russian financial instruments.
• Potentially high liquidity. Government bonds are always valuable, so they are easy to sell when needed. By the way, the accumulated income when selling bonds is not lost.
• Wide choice of repayment terms. Some OFZs are repaid in a few months, others in years and even decades.
• Variety by type of income. Russian OFZs are divided into several varieties according to the type of coupon payment and face value. This allows you to choose the appropriate type of bonds, focusing on your own strategy and the current economic situation.
• tax incentives. If the investor is an individual, the coupon income on federal loan bonds is not taxed, and in some issues it significantly exceeds the rates of corporate bonds and deposits.
• Low entry threshold. The price of one federal loan bond, as a rule, is about a thousand rubles.

OFZ Features

One of the key features of government bonds is the issue in documentary form with mandatory centralized storage. Each issue is confirmed by certificates kept by the Ministry of Finance and the depository.

The Central Bank of Russia is the general agent for the redemption, exchange, storage and servicing of government bond issues. This means that in paper form, "in hand", OFZs are not issued. They are registered with the owner in the register of the Central Bank in the form of electronic numbers.

The cost of federal loan bonds consists of two components:

1. Denomination. The absolute majority of bonds have a face value of 1,000 rubles. The purchase price of one OFZ is a certain percentage of the face value. For example, 95% - if the price of a bond is cheaper than face value, 100% - if it is equal, 105% - if it is higher. Prices depend on various market factors.
2. Accumulated coupon income. Most often, this figure is fixed, but there are OFZs with a floating coupon. Coupon income is accrued daily, payments are made several times a year.

OFZ types

Depending on the maturity of the debt, federal loan bonds are long-term, medium-term and short-term.

In addition, OFZs differ in the method of paying the coupon and face value. There are three types of bonds according to the type of coupon payments:

1. With a permanent coupon (OFZ-PD). This means that the coupon value is constant throughout the entire circulation period of the security. The coupon is paid every six months.
2. With fixed coupon income (OFZ-FD). In this case, the coupon value may change, but it is known in advance exactly how. For example, for the first couple of years, the coupon yield is 7% of the face value, in subsequent years - 6%. An example of this is depreciation bonds.
3. With a variable coupon (OFZ-PK). This means that the coupon is tied to a floating interest rate (for example, RUONIA - rates on overnight interbank loans of the 28 largest banks) or official inflation. For OFZ-PK, only the current coupon is known, and each next coupon is calculated depending on the average value of RUONIA over the past six months. Therefore, as interest rates rise in the money market, the OFZ-PK coupon yield rises, and vice versa.

There are two types of bonds at face value:

1. With nominal depreciation (OFZ-AD). This means that the face value is not redeemed immediately, but gradually - in parts. Moreover, the repayment schedule is determined in advance: at regular intervals or with interruptions, in equal or unequal parts.
2. With denomination indexation (OFZ-IN). The recalculation takes place every day, information about the current and future face value is published on the website of the Ministry of Finance a month in advance. Publication date - at least two business days before the start of a new month.

Yield on federal loan bonds

The yield on OFZ government bonds consists of two components: coupon yield and income from sale/redemption. To date, the yield of bonds is about 8-12% per annum.

The profitability of the last transaction may differ from the current one, so it is better to specify this parameter in the order book of the information and trading system (for example, ITS QUIK). It should also be remembered that for OFZ-PK, the yield is calculated not at the time of redemption, but at the date of payment of the last known coupon. Some investors calculate OFZ yields using a special program - a bond calculator.

Government bonds are taxed at 13%. It is charged on the difference between the purchase and sale (redemption) costs of OFZs. Moreover, in addition to the cost of the bond itself, the purchase and sale prices include the accumulated coupon income (ACI) paid or received by you and transaction costs. In this case, the coupon income is not taxed and, accordingly, does not take part in the calculation of the financial result.

How to invest in OFZ?

Federal loan bonds are sold and bought on the Moscow Exchange. But an individual will not be able to buy OFZ directly: all the activities of private investors on the stock exchange are carried out through intermediaries - brokers. Therefore, the first thing to do is to choose a brokerage company and conclude an agreement with it.

1. Open a brokerage or individual investment account (IIA). This can be done online by filling out an application on the Opening Broker website.

2. Install a special program on a personal computer - a trading terminal (for example, the same QUIK).

3. Top up your account. It is not necessary to immediately put huge sums on it: the price of one bond is about 1000 rubles.

4. Prepare to buy. It will be more convenient to work with securities if you create a current table of parameters in the trading terminal and add the “T+Bonds” class to it. A visual table is needed in order to quickly evaluate such important parameters as the current face value, the number of days until the maturity date, bid and offer prices, the number and volume of transactions, and coupon data.

5. Buy OFZ. To do this, open a trading glass in the terminal and click on the desired purchase price in the green sector (sale prices are shown in red). Remember that the prices of government bonds are displayed as a percentage of the face value: for example, a price of 97.20% means that with a face value of 1000 rubles, the cost of OFZ is only 972. In the application window, you can set the desired price and number of bonds.

When all the data is filled in, the program will show how much you need to pay for the bond, taking into account ACI and commission. To buy a federal loan bond, you need to click the "Yes" button. You can sell a bond in the same way.

After the purchase of the bond, the nominal value and coupon income will be transferred to the investor's personal account - a brokerage or bank account. Those who plan to buy OFZ on an individual investment account (IIA) and spend the coupon income need to warn the broker to transfer coupons to a bank account - it is impossible to withdraw money from the IIA without closing it.