Types of official contracts How to open an IIS and buy OFZ
There is a small amount for investment - around 300 thousand rubles. Every month I can replenish this amount by about 20 thousand. The investment period is 5-6 years. I am considering OFZ as one of the options.
I heard that if relations between the United States and Russia worsen, further sanctions may affect OFZs. So far, the United States has not imposed sanctions against Russia’s national debt, but news about this comes up periodically. If this does happen, what might happen to the bonds purchased?
Andrey, OFZ is one of the most reliable ways to invest money. Even in the event of sanctions against Russian government debt, it is unlikely that anything bad will happen to your investments. I’ll 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 OFZs in our article, so I’ll tell you briefly.
The government always needs money, and one way to get it is to borrow by issuing federal loan 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.
Types of OFZ
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 bond. The size of all coupons is known in advance and does not change until redeemed. Example - OFZ 26205.
With a fixed coupon (OFZ-FD). The size of all coupons is also known in advance, but may change. For example, in the first year of circulation the coupon may be 7%, the next year - 8%. Example - 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. Example - OFZ 29012.
Not all bonds have a constant par value. For OFZ-AD it is amortized - repaid in installments, and for OFZ-IN the nominal value is indexed in accordance with inflation.
Profitability and risks of OFZ
The yield on OFZs is usually at the level or slightly higher than that of bank deposits. For example, OFZ 26214, which will be repaid in May 2020, has an effective yield to maturity of approximately 7.3% per annum. Typically, the longer the time until 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 among anyone. However, there are fears that the United States will impose sanctions against Russian government debt and this will somehow affect investors holding OFZs.
If you want to receive passive income from bonds, pay attention to the coupon payment 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 arrive in January and July, OFZ 26215 in February and August, etc.
In summary: pros and cons
Investing money in OFZs through a Russian broker is a completely safe investment option. Even if the United States imposes sanctions against Russian government debt, OFZs will not disappear, coupons for them will be credited to your account, and the nominal value will be repaid on time.
Of the minuses, of course, the profitability is not much higher than on deposits. If your investment horizon is 5-6 years and you have the ability to contribute money regularly, consider also including a small amount of stocks in your investment portfolio or, better yet, stock indices. Over the long term, the return potential of stocks is higher than that of bonds. True, the risks are greater.
If you have a question about personal finance, luxury purchases or family budgeting, write to: [email protected]. We will answer the most interesting questions in the magazine.
Good day, dear readers! We have one woman who is constantly interested in investment opportunities.
And he is not only interested, but also acts. Either he will issue a deposit, or he will purchase shares of different companies - he is constantly trying new directions.
Recently I asked about OFZ. This is a very interesting tool. Do you want to know more about OFZ - what it is and how it can bring additional money? I really want to quickly start sharing useful information with you, so let’s start looking at everything in detail.
Federal loan bonds (OFZ): rate, yield, types. How to buy OFZ
Federal loan bonds (OFZ) are one of the types of securities in Russia, which are issued by the Ministry of Finance. In fact, the bonds have a standard format; their only peculiarity is that the reliability of the securities is ensured by the state itself.
Warning!
In essence, by buying OFZ, you are lending money to the state for a certain period.
With an OFZ, you will receive coupon income (usually every six months) throughout the life of the bond. Upon expiration, you will be returned the original cost of the bond itself.
Types of OFZ
Federal loan bonds are divided into several types according to the type of coupon payment and par value. According to the type of coupon payments, government bonds are divided into:
OFZ-PD - with constant coupon income. The coupon value of these securities is constant throughout the entire circulation period of the bond. The coupon payment frequency is once every six months.
OFZ-FD - with a fixed coupon. The amount of coupon payments may change over time, but is known in advance. For example, the first few years the coupon income may be set at 7% of the face value, and the next few years at 6%.
OFZ-PK - with variable coupon income. The coupons of such bonds are tied to some floating interest rate, for example RUONIA (the rate on overnight interbank loans of the 28 largest banks) or official inflation.
The coupon yield is calculated as the RUONIA rate + some interest rate, for example 0.74%. Therefore, for such bonds only the current coupon is known, and each subsequent coupon is calculated based on the average RUONIA value for the last 6 months.
Thus, if rates on the money market rise, then the OFZ-PK coupon yield also rises, rates fall - and the yield also falls.
Government bonds are divided into two types based on their face value.
Attention!
OFZ-AD - with nominal depreciation. For securities of this type, the nominal value is not repaid at one time, but gradually in parts. The depreciation schedule is known in advance. The denomination can be repaid at regular intervals, but there may be breaks. The nominal value can be repaid either in equal or unequal parts.
OFZ-IN - with nominal indexation. Now on the market you can buy two issues of securities of this type: OFZ 52001-IN with a maturity date of August 16, 2023 and OFZ 51001 with a maturity date of March 31, 2021.
These are bonds with a par value indexed to consumer inflation. The coupon yield of OFZ 52001-IN is 2.5% of the par value, OFZ 51001 is 2.25%, the coupon payment period is once every six months.
The denomination is indexed daily. Data on current and future denominations are published on the Ministry of Finance website a month in advance at least 2 working days before the start of the month. There you can also find out the value of the current coupon. Initially, these bonds were issued with a face value of 1000 rubles, now it is equal to 1040.4 rubles. Coupon income and income from indexation are not taxed.
Thus, OFZ 52001-IN gives a 2.5% net return above inflation. This instrument becomes especially profitable in conditions of rising inflation and rising interest rates, when ordinary bonds fall in price.
How is the OFZ rate calculated? OFZ market rates are either constant or variable. Constant or fixed rates are established for each coupon period of each individual issue. The variable rate is formed taking into account official data characterizing the level of inflation. The OFZ rate depends largely on the key rate of the Central Bank of the Russian Federation.
What is the yield on federal bonds?
The yield on OFZ is formed from two parts:
- The income that the owner of a Russian federal loan bond receives from the coupon;
- Profit from purchasing a coupon at a price lower than its nominal value.
If a bond is purchased at a price higher than the nominal price, without taking into account the coupon income, this leads to a loss, because its repayment is carried out strictly at the nominal value.
In the process of OFZ circulation, coupon profit is accumulated. As the next coupon becomes due, the bond's value increases. An investor who resells a bond before the coupon payment must take into account the accumulated payments on the security.
Advice!
The cost of purchasing bonds is constantly within the par range. The exact price is determined by market conditions, which can be either higher or lower than the cost of the bond.
When working with OFZs, you need to take into account the specifics of taxation of this type of income. Each type of income under OFZ is subject to taxes. For example, for the income received from the difference between the purchase and sale of a bond, you will have to pay about 35%. Net coupon income is taxed at 15% of the amount received.
It is extremely important to take these points into account in order for manipulations in the bond market to bring good profits. Any activity in this segment is regulated by law.
What is the advantage over other securities?
Investing in bonds is one of the most reliable types of investment. When compared with bank deposits, the level of reliability of OFZs is higher. The reliability of bank deposits directly depends on the bank's rating. There is a direct relationship here: the higher the reliability of the bank, the higher the reliability of the safety of deposits. But there is also a significant disadvantage.
A high reliability rating comes at the cost of lower interest rates. If we analyze the offers from the largest Russian banks (Sberbank, VTB and others), we see that their bank deposit rates are the lowest. The difference can be 50-80% than the average for this sector.
The state is the guarantor of the OFZ payment. And accordingly, the state reliability rating. bonds is equal to the credit rating of the state itself. It is responsible for its obligations to state holders. debt.
If the state ceases to meet its obligations, a default occurs. But the probability of a default in the country is much lower than the default of any private company.
Higher in reliability are only bonds of foreign issuers. But they usually have lower returns.
Where are they trading and who can buy?
OFZs are traded on the Moscow Exchange and can be purchased through any broker. Buyers and holders of OFZ can be both Russian and foreign legal entities and individuals. The cost of one bond is 1000 rubles, the yield is in rubles.
Warning!
The procedure for purchasing OFZs is no more complicated than opening a bank deposit. All you need is to choose a broker, enter into an agreement with him and purchase OFZ.
Also, many major banks provide similar services. You can also get advice from them, depending on your goals, which bonds you can buy at the moment.
source: https://fortrader.org/birzhevoj-slovar/obligacii-federalnogo-zajma.html
What are federal loan bonds?
Federal loan bonds (OFZ) are debt securities issued by the Government of the Russian Federation represented by the Ministry of Finance. Depending on the maturity of the debt, there are short-term, medium-term and long-term. Both individuals and legal entities can buy federal loan bonds.
OFZ owner:
- regularly receives coupon income (percentage of the debt amount),
- can resell the bond at a favorable price,
- receives the face value of the bond on the maturity date.
In other words, the state borrows financial resources for its needs by issuing federal loan bonds under the guarantee of the Central Bank of the Russian Federation. The state transfers income to OFZ owners in the form of regular coupon payments.
What is the price?
The cost of OFZ consists of several components.
Denomination The vast majority of federal loan bonds have a face value of 1,000 rubles. The cost of purchasing one security is expressed as a percentage of the face value.
For example, 95% (the bond is trading below par), 100% (the price of the bond is equal to the par price), 105% (the price of the bond is above par). Quotes depend on many market factors. You can track the price of OFZ and other securities online by downloading the free SMARTx trading terminal.
Accumulated coupon income. Most often, the coupon size is fixed, but there are OFZs with a floating coupon income (linked to inflation or the RUONIA rate). Coupon income is accrued daily and paid several times a year (the time is determined by the terms of the issue of a particular security).
This means that the person who buys the OFZ from you must pay the NKD for the time you own the paper.
Attention!
Federal loan bonds are quoted as a percentage of face value. The price also includes the income tax, which the buyer pays to the seller.
For example: OFZ 24206, quote 98.12, NKD = 31.22 rubles. What is the cost of paper in rubles?
The denomination is 1000 rubles, and the quotation is expressed as a percentage of the denomination.
1000 rub. * 98.12% = 981.2 rub.
Since when purchasing paper the Client pays the NCD to the seller, the total cost for the buyer will be: 981.2 + 31.22 = 1012.42 rubles.
One more thing needs to be remembered: whatever the purchase price, at the time the OFZ is redeemed, its owner will be returned the nominal value.
Where to buy OFZ?
OFZs are bought and sold on the Moscow Exchange stock market. Access to trading is provided by the broker, ITinvest. The broker organizes large transactions at the request of the client outside of trading on the exchange (RPS mode).
How to buy federal loan bonds for an individual? To purchase federal loan bonds for individuals (citizenship does not matter), it is necessary to enter into an agreement with a broker and open a special brokerage account. If you are a citizen of Russia, you can open an account with ITinvest without leaving your home.
The procedure is simple:
- Submit an application to open an account.
- Download the free SMARTx terminal (here you will buy securities and track their prices online).
- Get advice from a broker about which bonds to buy and when.
- Purchase selected securities.
- Earn income.
Does the Client receive the OFZ purchased by him “in hand”? Federal Loan Bonds are issued in documentary form with mandatory centralized storage. Each issue is issued with certificates stored in the Ministry of Finance of the Russian Federation and the depository. The ITinvest broker has its own depository, which is responsible for the securities purchased by clients.
For the Client, all of the above means that he does not receive the OFZ “in hand”. OFZs are registered with him in electronic form in the form of serial numbers recorded in the register of the Central Bank.
What is the yield?
The first advantage is, of course, reliability. These are actually obligations of the state to the owner of the OFZ. Of all the assets, this is the most reliable. Profit also remains at the same level. At the time of writing, the yield on federal loan bonds is 9–10%.
You can improve your returns by consulting with your broker about when to buy and when to sell bonds.
What types of OFZ are there?
Government federal loan bonds are divided into several types:
- with fixed and floating coupon income,
- in denominations of 500 rubles, 1000 rubles, 100,000 rubles. and etc.,
- with coupon income paid once, twice or four times a year,
- ordinary and with debt amortization: when a bond is amortized, its par value is reduced by the value of the paid coupon (but the price on the exchange as a percentage will not change - 100% of the par value, of the par value of the lower value),
- regular and federal loan bonds with an indexed par value: the par value is regularly indexed in accordance with existing inflation (for example, OFZ 52001).
source: www.itinvest.ru/obligacii/obligacii-federalnogo-zajma/
Types and features of GKOs and OFZs
The market for government bonds issued by the Ministry of Finance of the Russian Federation and traded on the exchange market (Moscow Exchange) is represented by the following types of bonds:
- Government short-term zero-coupon bonds (GKOs)
- Federal loan bonds with variable coupon yield (OFZ-PK)
- Federal loan bonds with constant coupon yield (OFZ-PD)
- Federal loan bonds with fixed coupon income (OFZ-FD)
- Federal loan bonds with debt amortization (OFZ-AD)
Government short-term zero-coupon bonds (GKOs). The income from GKOs is a discount, i.e. the difference between the selling price (at redemption, this price is equal to the par value of the bonds) and the price of their acquisition during the initial placement or on the secondary market. The maturity of GKOs is up to 1 year. The face value of the bond is 1,000 rubles.
Federal loan bonds with variable coupon yield (OFZ-PK). OFZ-PK refer to bonds with an unknown coupon income. Bonds with unknown (variable) coupon income give its owners the right to periodically receive interest (coupon) income. The frequency of coupon payments is 2 or 4 times a year.
Advice!
The size of each OFZ-PK coupon is announced immediately before the start of the corresponding coupon period based on the current yield of GKO issues, which are redeemed approximately at the same time as the date of payment of this coupon.
At the same time, it is also possible to receive a discount if the purchase price of bonds (at the primary placement or at secondary auctions) is less than their sale price, including when the bonds are redeemed at their par value. The face value of the bond is 1,000 rubles. The circulation period of OFZ-PK is from 1 to 5 years.
OFZ-PD, OFZ-FD, OFZ-AD refer to bonds with a known coupon income. Bonds with a known coupon income (the amounts of which are announced in advance by the Issuer) are securities that give its owners the right to periodically receive interest (coupon) income.
At the same time, it is also possible to receive a discount if the purchase price of bonds (at the primary placement or at secondary auctions) is less than their sale price, including when the bonds are redeemed at their par value.
Federal loan bonds with constant coupon yield (OFZ-PD). In the case of OFZ-PD, the sizes of all coupons are determined as a constant value for the entire period until maturity. The circulation period of these bonds is from 1 year to 30 years, the frequency of coupon payments is once a year. Denomination 1,000 rubles.
Federal loan bonds with fixed coupon income (OFZ-FD). In the case of OFZ-FD, the amount of coupon income is established upon issue as a fixed value, which may vary for different payment periods. The maturity of the bonds is more than 4 years, the frequency of coupon payments is 4 times a year. Denomination 10 or 1000 rubles.
Federal loan bonds with debt amortization (OFZ-AD). This is a relatively new tool, first released in May 2002. The main feature of OFZ-AD is that the par value of the bonds is repaid in installments on different dates.
The maturity of bonds can be from 1 year to 30 years (the nearest maturity year for bonds currently in circulation is 2006). The frequency of coupon payments is 4 times a year. Denomination 1000 rubles.
Warning!
Although the full coupon amount is paid by the issuer of bonds to the person who owns them on the payment date, or coupon date, each previous owner is also entitled to receive income in proportion to the period of ownership.
This is achieved by the fact that when purchasing bonds, their buyer must pay the previous owner, in addition to the actual price (the “net” price) of the bonds, also the amount of the accumulated coupon income.
source: https://2stocks.ru/2.0/russian/bonds/general/538
Federal loan bonds: concept and profitability
Medium-term securities are a necessary tool for financing the budget deficit, since they make it possible to solve the problem of refinancing short-term issues over a relatively long period. The prerequisites for the creation of a medium-term securities market in Russia arose as economic stabilization began to take place in the summer of 1995.
The main type of medium-term securities in Russia are federal loan bonds (OFZ). Features of OFZs include the use of paperless (electronic) technology, floating coupon income, medium-term circulation period and the registered nature of the paper.
Federal loan bond (OFZ) is a state registered coupon security that has a circulation period of more than 1 year and gives the owner the right to receive interest income accrued to the face value of the bond and the amount of the principal debt (face value or other property equivalent) paid upon redemption OFZ.
The issuer of OFZ is the Ministry of Finance of the Russian Federation on behalf of the Russian Federation. The issue of OFZ is carried out periodically in the form of separate issues in accordance with the “General Conditions for the Issue and Circulation of Federal Loan Bonds”, approved by the Decree of the Government of the Russian Federation of May 15, 1995.
The total volume of OFZ emission is determined by the Ministry of Finance of the Russian Federation within the limit of state internal debt established by federal laws on the federal budget for the corresponding financial year.
OFZs are issued in uncertificated form. Accounting for bonds and, accordingly, their owners is carried out in the form of entries in securities accounts. Each issue is issued with a global certificate in two copies having equal legal force, one of which is stored in the Ministry of Finance of the Russian Federation, the second in the depository.
Attention!
The global certificate indicates: the volume of the issue, the amount of the coupon income or the procedure for its calculation, the placement date, the maturity date, the date of payment of the coupon income and restrictions on the share of the issue volume purchased by non-residents. The Ministry of Finance of the Russian Federation, in agreement with the Central Bank of Russia, approves the terms of individual OFZ issues.
OFZs are placed through auctions and trading sessions. The Central Bank of Russia acts as a general agent for servicing OFZ issues and regulates, in agreement with the Ministry of Finance of the Russian Federation, issues of placement and circulation of OFZ, incl. pays coupon income and redeems bonds at the expense of the issuer.
Cash settlements for OFZ transactions are carried out through the Central Bank of Russia and its territorial institutions, as well as other credit organizations in the manner determined by the Central Bank of Russia in agreement with the Ministry of Finance of the Russian Federation.
Federal loan bond yield
The effective yield to redemption of federal loan bonds is determined from the following equation (yield is calculated using approximate numerical methods) |21|:
- P - price as a percentage of the face value;
- A is the accumulated coupon income at the time of purchase of the issue;
- ti is the period before payment of the i-th coupon;
- Ci is the size of the i-th coupon as a percentage of the face value;
- N is the nominal value of the issue;
- T - term until maturity of the bond;
- y is the effective annual OFZ yield to maturity, expressed in fractions of one.
The placement of OFZs and the conclusion of all transactions on them is carried out through organizations authorized by the Central Bank of Russia to carry out depository and dealer activities with OFZs. Since April 1, 1998, the functions of the depository for OFZs have been performed by the National Depository Center.
The placement of bonds and the conclusion of all transactions with OFZ on the secondary market are carried out through the trading system of the Moscow Interbank Currency Exchange. Information about the next OFZ issue is announced no later than 7 days before the date of its placement. The issue is considered to have taken place if at least 20% of the number of OFZs expected to be issued was sold during the placement process.
The Central Bank of Russia, at the direction of the Ministry of Finance of the Russian Federation, may additionally sell OFZs that were not sold during the placement period of a separate issue, and repurchase OFZs ahead of schedule on the secondary market (during the trading session).
The dynamics of circulation of federal loan bonds for individual issues can be judged from Fig. 1. In 1995, the first issue of federal loan bonds with variable coupon income (OFZ-PC) was carried out.
The amount of coupon income, determined on the basis of the yield on GKOs and calculated separately for each coupon period, is announced for the first coupon no later than 7 days before the start date of placement, for subsequent coupons - no later than 7 days before the date of payment of income for the previous coupon .
Advice!
The maximum circulation period of those issued in 1995–1998. OFZ-PK - 3 years, coupon period - 3 and 6 months. Since January 1, 1998, the nominal value of OFZ-PK is 1 thousand rubles.
The volume of OFZ-PK in circulation increased from 8 billion rubles. (denominated) as of January 1, 1996 to 47.6 billion rubles. as of January 1, 1998
Their share in the total amount of domestic debt expressed in securities during this period ranged from 11 to 14%.
The new issue of OFZ-PK was circulated in the period 2000–2003. in the amount of more than 24.1 billion rubles, which amounted to 4–5% in the structure of domestic debt. OFZ-PK were finally repaid in 2006.
In 1996, the Ministry of Finance of the Russian Federation began issuing federal loan bonds with a constant coupon yield (OFZ-PD). The amount of coupon income announced upon issuance of OFZ-PD is constant and is valid throughout the entire circulation period of these bonds (for all coupons). WITH
OFZ-PD circulation period is from 2 to 15 years, coupon period is 3, 6 and 12 months. Since January 1, 1998, the nominal value of OFZ-PD is 1 thousand rubles. OFZ-PD immediately took a significant place in the developing government securities market.
As of January 1, 1998, the total volume of placed OFZ-PD at par value was already 115.8 billion rubles, or 26% of the total volume expressed in securities of government internal debt; as of January 1, 2000 - 402.2 billion rub. (76%).
In the period from 2000 to 2004, the volume of OFZ-PD decreased to 43.3 billion rubles. (6%). But from 2005 to the present, the Ministry of Finance of the Russian Federation continues to increase the issue of this type of bonds, and as of January 1, 2011, OFZ-PD were circulating on the market for a total amount of 1823.7 billion rubles, which amounted to more than 51 % of the total volume of government internal debt expressed in securities.
The third type - federal loan bonds with a fixed coupon income (OFZ-FC) - has been placed by the Ministry of Finance of the Russian Federation since 1998. As of January 1, 1999, the total volume of OFZ-FC in circulation was 112.56 billion rubles.
Warning!
The share of domestic debt was about 23%, which made this type of bonds the second most important on the market after OFZ-PD. The issue of OFZ-FK increased until 2002, and as of January 1, 2003, OFZ-FK in the amount of 207.1 billion rubles were in circulation, which accounted for 32% of the total amount of government domestic debt expressed in securities.
Since 2003, the volume of OFC-FC in circulation has been decreasing annually, giving way in the debt structure to longer-term types of federal loan bonds. Since 2004, it has decreased sixfold and, as of January 1, 2009, amounted to 33.8 billion rubles, or about 2.5% of the structure of domestic debt. In 2009, OFZ-FK were finally repaid.
In 2002, long-term instruments were placed for the first time - federal loan bonds with debt amortization (OFZ-AD) with a circulation period of more than five years, for a nominal amount of 42.3 billion rubles. (6.5%), which made it possible to lengthen the duration of public debt and avoid unwanted peaks in the load on the federal budget in 2003–2005.
Currently, OFZ-AD is the most significant long-term instrument of government internal debt. Over the entire period (starting from 2002), the volume of this type of OFZ in circulation increased more than 25 times, reaching 1,079.58 billion rubles by January 1, 2011, which is more than 30% of the total volume of government internal debt, expressed in securities.
In general, it can be noted that federal loan bonds continue to be the main internal source of raising funds into the federal budget on a repayable basis.
The share of OFZ in the total amount of federal budget revenues from the placement of government securities for the period from 2001 to 2006 increased from 25 to 100%, or from 14 billion to 185 billion rubles. In 2007, income from the placement of OFZ amounted to 245 billion rubles, but the share decreased to 83%; in 2011 - 1046.3 billion rubles. (81%).
These structural changes are explained by the appearance in circulation since 2006 of a new type of non-marketable securities - government savings bonds, aimed at saving and capitalizing targeted pension savings.
Thus, the very ideology of government internal borrowing is gradually changing. In addition to solving fiscal problems, debt instruments are now used for socio-economic regulation.
source: www.grandars.ru/student/finansy/obligacii-federalnogo-zayma.html
People's loan bonds: time to earn money
Everything new is well forgotten old. This truth is also true for federal loan bonds (also called people's bonds). The government borrowing cash from its own population is a fairly common practice. New federal loan bonds (OFZ-n) are not new in the monetary policy of our country.
Attention!
The lack of money from the state during this period again forced the government to turn to its citizens for help. In fairness, it must be said that citizens will not lose out either - purchasers of OFZ-n are promised quite a substantial profit.
A bond is a document, a security issued to a person who has lent money to an organization or state. He is called an investor. The bond gives the right to repay the debt along with interest. It can be sold, bought, or inherited. The bonds must be redeemed by the debtor after a specified period.
There are two types of profit bonds - interest-bearing and discount. In the first case, the benefit is obtained by charging interest on the amount spent - coupons. In the second, the bond is initially sold at a price lower than the amount indicated in the security. When the debt is repaid, the value increases to the face amount of the bond.
Depending on who issued the bonds, they may be:
- state - issued by the Ministry of Finance;
- municipal – issued by the administrations of a region, city or district;
- corporate - the issue is organized by legal organizations, for example, joint-stock companies.
Federal loan bonds for individuals (OFZ-n) are government interest-bearing bonds with high yield.
Federal loan bonds, or OFZs, are one of the most reliable securities because the borrower is the state. The domestic economy is not in danger of default, which means that creditors can count on profits.
OFZs bring profit to their owner in two ways: selling or owning them and receiving coupon income. It makes sense to hold bonds for a long time, in which case the income will be greater - the annual interest will increase.
Bonds have a number of advantages:
- The profit on them is fixed and the period for receiving it is agreed upon when issuing OFZs.
- It is expected that the income from them will be higher than from bank deposits.
Over the past year and the first half of this year, conventional financial instruments showed negative returns: interest rates on bank deposits decreased, real estate and currency fell in price.
Commissions and expenses
A bond costs 1,000 rubles, but you cannot buy 1 piece, the minimum cost of one lot is 30,000, which means you will need to buy at least 30 bonds. A maximum purchase limit has also been established - no more than 15,000,000 rubles.
Warning!
However, the rules do not say anything that such a purchase cannot be made at another credit institution or during the sale of another bond issue. This year, the following banks are engaged in sales of OFZ-n: Sberbank and VTB-24.
When purchasing, you must pay a commission. Its value depends on the amount spent:
- less than 50,000 rubles – 1.5%;
- in the range from 50,000 to 300,000 rubles – 1%;
- more than 300,000 rubles – 0.5%.
It should be remembered that when selling bonds, interest will be charged at a similar rate. These expenses should be immediately deducted from the estimated profit. But the commission will be charged only in case of early sale.
How to use it to your best advantage
The easiest way to make money on OFZs is to buy them and hold them until maturity. In this case, they are similar to a bank deposit, with one difference - interest (usually, as there are exceptions) is paid twice a year.
There are two types of OFZ available to individuals, simply OFZ and the so-called. “folk” OFZ, n-OFZ. They have similar yields (7 - 8%), but differ greatly in terms of circulation.
To purchase ordinary OFZ requires opening a brokerage account (takes about the same time and requires the same documents as a bank account).
All major banks have a “sister” brokerage company. Their denomination is 1000 rubles, you can buy and sell them on any working day, during the opening hours of the exchange (where, in fact, they are traded). Accordingly, you can buy them from 1000 rubles. Conveniently, you can sell on any working day, there are no restrictions.
You must pay a commission (0.05% - 0.1%, depends on the broker). They will charge a depository fee for storage (the conditions depend greatly on the broker, maybe 250 rubles per month, sometimes it’s free). Transactions for the purchase and sale of bonds on the stock exchange are usually done using special services. programs. But you can also do it by voice, by phone. or in the broker’s office (this is easier for non-specialists).
Attention!
"Folk" OFZ (n-OFZ) do not require opening a brokerage account and are sold in authorized banks (for now - in Sberbank and VTB).
However, the commission will be 1.5%, and to receive full profitability you need to hold it for 3 (three) years. After one year, you can sell, but with a loss of profitability. The minimum amount for purchase is 20,000 rubles. The main disadvantage of n-OFZ is the long fixed term (and the commission is quite high). In other respects, n-OFZ and simply OFZ are similar.
Interest in OFZs has grown significantly due to a fall in the yield of bank deposits. And, most likely, this trend will continue.
In order for the benefits from bonds to be great, they must be purchased on time and handed over on time. Federal loan bonds are different in that the period for their sale and purchase is strictly limited by the rules. They can only occur between April 2017 and April 2020.
The amount of profit depends on when the existing bonds are sold. The date of appearance of the first batch of OFZ-n is April 26, 2017. The last repayment date is April 27, 2020.
The sooner bonds are purchased and the longer they are held, the greater the profit will be. If you sell OFZ-n before the expiration of 12 months from the date of purchase, interest income is 0!
Interest payments (coupon income) are scheduled for the following dates:
- after December 1, 2017 – 7.5% per annum;
- after May 2, 2018 – 8%;
- after October 31, 2018 – 8.5%;
- after May 1, 2019 – 9%;
- after October 30, 2019 – 10%;
- after 04/29/2020 – 10.5%.
The amount of interest, or the amount of coupon income, accumulates as the period from the date of purchase increases. It can be taken immediately or left until the entire package of bonds is sold. Through simple calculations, it turns out that the most income can be obtained if you buy a package of bonds worth 15,000,000 rubles at the very beginning of sales and do not sell it until April 29, 2020.
Peculiarities
OFZ-n bonds, unlike regular exchange-traded bonds, have some restrictions on their use:
- they are sold only to citizens of the Russian Federation who have reached the age of majority;
- they cannot be used for purchase and sale on the financial market, sold to another individual or legal entity, they cannot be the subject of collateral and a means of payment;
- It is possible to cash out bonds only at the bank where they were purchased;
- no other bank will be able to accept the bonds as a deposit, nor can they be transferred by bank transfer.
Circulation on the secondary market as an item of purchase and sale is excluded; they cannot be given as a gift. However, OFZ-n can be inherited.
Advice!
The sale of the first issue of OFZ-n will be carried out for six months after April 26, 2017, then it will be discontinued. After this, the next issue will begin to be sold. The price of 1 bond will vary depending on market conditions. But after the acquisition, the cost and conditions (profitability) are fixed and cannot change.
All information about current prices is on the official website of the Ministry of Finance. It is updated every week. In addition to the cost, the Ministry of Finance website contains information about the yield of OFZ on a specific day.
OFZ-n are not the only federal loan bonds in Russia. There are others, for example, OFZ-29006-PK bonds must be repaid at the beginning of 2025, and OFZ-46011-AD - in August 2025. The listed bonds are freely sold and purchased on the stock exchange.
This is how they differ from OFZ-n, which cannot be sold on the free market; they can only be handed over to the bank where the purchase was made.
pros
These securities have the advantage that they will never be worth less than the amount for which they were purchased. The state guarantees the receipt of profits in the amount in which they are prescribed in the rules of use!
Procedure and place of purchase
OFZ-n also differs from other bonds in that it is designed for purchase by inexperienced investors with minimal financial literacy. When purchasing, you need to fill out a simple package of documents, comparable to the usual opening of a bank account.
OFZ-n bonds are not issued to clients. They are issued electronically and have no paper counterpart. All operations are carried out in the client’s personal account on the Internet.
Now only 2 banks are engaged in sales. They have the largest number of branches and are present in all regions of Russia. If sales volumes increase, then it is possible to connect other banks to the sale, where it will be possible to buy federal loan bonds for individuals.
To purchase, the client needs to contact the branch of Sberbank or VTB-24 Bank that provides investment services. A brokerage account and a securities account are opened in the client's name. Further, bonds can be purchased either via the Internet in your Personal Account, or by giving the appropriate order to complete the transaction at a bank branch.
It must be taken into account that the price of the bond will rise every day. In addition to the nominal value at the moment, when purchasing after April 26, you will also need to pay for the amount of interest accumulated up to this point.
Profit from OFZ
The state promises higher profits from OFZ-n compared to the conditions for other bank deposits.
In the case of federal bonds, the yield does not decrease due to their position in the market. Any monetary losses on the part of buyers are excluded. If they do not sell their bonds at the end of the term, the money will be transferred to their accounts automatically through online accounts.
Warning!
Unlike exchange-traded bonds, OFZ-n cannot be sold lower than the purchase price. But they won’t cost more than the declared face value (1000 rubles). Bank commissions will take a certain amount from the income.
Income from the sale of bonds is taxed, but according to a preferential system. Coupon income is not subject to taxation. The amount of tax on income from sales was set at the usual rate of 13%. The main profit is obtained from coupons, so the amount of tax has almost no effect on the final benefit.
Buying OFZ-n bonds is a good way to invest available funds. When counting on profit, you need to make sure in advance that this money will definitely not be needed for at least the next 12 months. You cannot hope to make a profit in case of early sale of purchased bonds. But even if you have to withdraw the deposit earlier, there should be no loss of invested funds.
Probability of government bond default
Federal Loan Bonds are securities denominated in rubles, which are issued by the Ministry of Finance of the Russian Federation, so in fact they are state-owned. The point of OFZs is that they are a form of government credit.
Let me give you an example. The Government of the Russian Federation needs funds to implement any project, be it to build a road, a school, a clinic, restore infrastructure, etc., but there is not enough budget money for this (budget money has already been allocated for other needs).
In this case, Federal Loan Bonds are issued, and the state receives the missing monetary resources to finance a specific project.
Trading in government OFZs is carried out on the Moscow Exchange in the “Stock Market” section, where all corporate and regional bonds, as well as shares and shares are traded.
OFZs provide interest income on the nominal value; in addition, they can have different circulation periods (short-term up to a year, average term from 1 to 5 years and long-term securities from 5 to 30 years).
Now let's talk about the risks that exist in government bonds. In general, such securities are considered risk-free, they are backed by all the assets that are at the disposal of the Government of the Russian Federation, so it is very difficult for the state to go bankrupt!
Attention!
However, memories of the 1998 default are still fresh in Russia, when private investments were simply written off to zero.
If we analyze the past, we can see that a default at the state level is a very predictable event.
Firstly, the stock market clearly signals this, and when problems begin in the country, the quotes of companies with a large share of state participation begin to lose a lot in value, which is generally reflected through stock indices (which begin to decline).
Secondly, state default does not just start! The first signs can be seen in the municipal bond sector.
In general, municipal bond loans are backed by gold and foreign exchange reserves, and if there are a sufficient number of such resources, then the Government will cover municipal debts, preventing a default at the level of any city from occurring (after all, a city’s default greatly spoils the authority of the country as a whole).
But if a default of any municipality has occurred, this indicates that gold and foreign exchange reserves are at zero and the state itself may soon default.
Therefore, if you hear about the default of a city, then immediately get rid of government bonds and transfer to a more “hard currency”.
So, federal loan bonds are very reliable fixed income instruments.
Thanks to the types of OFZs and depending on the expectations that you have (market rates will rise or fall), you can choose the right bond that fully matches your investment goals.
The advantage of OFZs is that they are very liquid; at any moment of the trading session there is always good demand and good supply for them. The downside is the low profitability, but this disadvantage is outweighed by the reliability you get.
Based on the activity in the comments, typical questions from novice IIS owners have accumulated. The most important of these questions sounds like “Which OFZ to buy on IIS?”
The answer to the question “which is best to buy” will depend on what the investor’s goal is. There is a well-known saying: “A mountain has one peak, but there are many paths to it.” This means that the goal of “earning more profit” does not mean anything without the necessary clarification:
- For how long?
- With what risks?
- In what markets?
These are just the most basic points that can be considered. Thus, the very existence of such a question “Which OFZ to choose for purchase?” - it's just pointless. Like that old joke:
- Petka, equipment?
- Nine!
- What is “nine”?
- What about “devices”?
This anecdote illustrates the impracticality (and, to some extent, absurdity) of such a question. As for making a profit, it can be obtained in different ways, and not everything is measured by its size.
In fact, in a casino, the potential profitability can be much higher than from OFZ coupons (as of January 2017, about +6.7% per annum), but the probability of this potential profit is orders of magnitude lower than with OFZ (with OFZ, the probability of profit is close to 100%), and the risks are such that hardly anyone will agree that a casino is the best way to achieve the goal of “maximum profit”.
Thus, the answer to the question “which is best to buy OFZ for IIS” will differ depending on what our investment strategy is. It’s one thing if we use it, and another thing if our plan is to buy and forget for three years.
A little later in the site materials we will look at all possible strategies for using OFZ on IIS, but right now we can take several scenarios as an example:
- "Buy and forget"
- "Bond crocodile"
- "Coupon Harvester"
Bought and forgotten
Most IIS investors prefer this simplest strategy - select suitable OFZs once and do nothing else for the remaining three years.
In this case, the task is:
- Do as few actions as possible
- Find OFZ with a maturity date close to the expiration date of the 3-year term of the IIS agreement
- Get maximum yield by purchasing longer bonds
In a normal and stable economy, you can always get much greater profits by placing funds for a longer period.
You can verify this by studying bank deposit rates:
There is a logic to this: the longer the investment period, the higher the risk of unpredictability, which means that the investor needs a higher reward for taking on increasing risks.
The described pattern is also true for OFZ:
Thus, OFZs maturing in three years should be more profitable than those OFZs that will mature in the next 3-6 months. The willingness to play “long” is the main “trump card” of such an investor, and it is precisely this that is advisable to play using the “buy and hold” strategy.
However, if you take a closer look, you can see that, for example, at the moment, purchasing OFZs with a maturity date of 3-4 years does not provide a significant advantage:
For example, purchasing OFZ 26208 with maturity in a year has the same yield as OFZ 26205 with maturity in 3 years.
In those cases where OFZs do provide an advantage in long-term profitability, we see that this advantage is negligible, about +0.1-0.2% per annum!
Disadvantages of the buy and hold strategy
Why do most IRA investors prefer this strategy? Because of its apparent lightness. At first it seems that you only need to work hard once, and then only get results.
But the reality is that following this strategy in its pure form does not work:
- From time to time you need to make a decision about what to do with the income (coupons). Such a decision will have to be made at least twice a year, and if the portfolio contains more than two OFZ issues, then 4 times a year or more. If the tax deduction is reinvested, then the number of transactions again increases
- Ideally, an investor needs to forecast in order to receive maximum income from using OFZ
The main risk is that rates in the economy will change, and an investment that seemed very profitable today may look completely different in a year or two:
You can imagine how uncomfortable it will be for us if, for example, we consider a case where we entered into a bank deposit agreement for 3 years at 10% per annum, and after just a year the deposit rates jumped to +15% per annum (this situation occurred in 2014 ), and we still have to (let’s assume that according to the terms of the agreement we cannot terminate the deposit agreement before the end of the term) keep our money at a modest +10%.
OFZ with a constant or variable coupon?
As you can see, OFZs with a constant coupon may turn out to be unprofitable if rates in the economy are raised (in simple terms, this can also be called an increase in inflation).
The use of OFZ with a variable coupon eliminates this problem, because the yield of such OFZ will change following the bank refinancing rate, but you can end up in the opposite situation, in a situation with a decrease in rates in the economy, while OFZ with a constant coupon makes it possible to fix the profitability for the entire period up to repayment.
This means that even here the investor will have a difficult choice of which OFZ to buy: with a constant or variable coupon, and the answer to this question will depend on what forecast he has for changes in rates in the economy for the next three years.
If rates are expected to increase over the next 3 years, OFZs with a variable coupon will be more profitable; if rates are expected to decrease, OFZs with a constant coupon will be more profitable
How can we understand what rates will be in the future?
Here is how the key rate of the Central Bank of the Russian Federation has changed over the past 15 years:
It can be seen that since 2003, rates have generally decreased, reaching a minimum of 5.5% per annum in 2013. Current rate (01/31/2018) = 7.75% per annum, there is very little left until there is an absolute historical minimum.
Options for changing the bank rate
There are, as always, three options: bad, good and average.
A sharp increase in rates for
Looking at the graph, you can see that there were periods on the graph where the trend moved in the opposite direction: 2007-2008 (Global Financial Crisis) and 2013-2014 (Crimean Crisis).
Are such events possible in the future? Yes, they are possible. Anyone who believes in the possibility of such events in the future should buy OFZs with a variable coupon - in case of surprises, the yield will change following inflation (high rates).
Smooth rate growth
A smooth increase in the rate is possible against the backdrop of further deterioration with the West - a ban on American and European investors to purchase Russian OFZs could put the state in a situation where it will have to attract money at increasingly higher rates.
Most likely, the effect of such an event will not be immediate, but will be extended over several years, because selling 30% of the total volume of existing OFZs (the volume in the hands of non-residents) will not only be difficult, but impossible.
In this case, the ban will probably only apply to the purchase of new OFZ issues. Rates will slowly but steadily creep up, and with them the OFZ yield. Therefore, buying OFZs with a variable coupon again looks preferable: if the rate (and inflation) increases, then the yield of such OFZs will also increase.
Further rate reduction
The option of further reducing the rate suggests itself based on the entire trend of the past 15 years. A rising oil price (for example, up to $100 per barrel) may make it possible to fill the budget from completely different sources than loans through OFZs.
In this case, rates could naturally go down, which means buying OFZs with a constant coupon would be very profitable: it’s nice to receive a risk-free 7% on your investment, when banks will barely give 4-4.5%.
Which option is more likely?
If we accept the axiom of the cyclical nature of the economy (a recession is always followed by a rise, and a rise is always followed by stagnation or recession), then it is likely that the wave of rate cuts that has been going on since 2014 is coming to an end.
In 2013, when there was no Crimean crisis and the concept of “sanctions” did not exist for citizens of the Russian Federation, the rate reached 5.5% per annum.
Can this happen now, when sanctions are not only not being eased, but also new ones are being introduced?
It probably makes sense to increase the share of OFZs with a variable coupon in the portfolio; in this case, protection against “black swans” and rising tensions will be maximum.
Which OFZ to buy for the next 3 years
As you can see, the “bread” of an investor adhering to a “buy and hold” strategy is not entirely easy. You can spend no less time and effort on the work than when using other strategies for using OFZ on your IIS. And by and large, this is not the easiest option for using bonds, as it seems at first glance.
Be that as it may, for a person who is going to stick to this strategy, answer to the question “Which OFZ is best to buy on IIS” will sound like this:
One issue (one name of OFZ) with a variable coupon or (if OFZ with a constant coupon) with the maximum yield to maturity on a date close to the end of the 3-year term of the IIS agreement
In this case, investing will be as close as possible to the principle of simplicity, and is available to any novice IIS owner.
Here is a list of OFZs that may be suitable for such investment in 2018-2019:
Note: the yield of OFZ 29011 is indicated for reference, corresponds to current rates and will change in the future. Despite the fact that this OFZ has a duration of only two years, after two years another similar OFZ with a variable coupon will appear on the horizon - OFZ 29012.
At this point, the consideration of the “Buy and Hold” strategy of the question “Which OFZ to buy on IIS” can be completed and we can move on to alternative strategies for using OFZ.
Bond crocodile
Only OFZs are suitable for the strategy with repayment in the next 3-9 months. Only in this case will it be possible to effectively use this mechanism.
This is a very simple and only condition. Of course, it goes without saying that it is best to choose the most profitable OFZs, i.e. OFZ with the highest possible yield to maturity in these remaining few months.
As of January 2018, there is only one OFZ that more or less approaches these parameters - OFZ 26208 with maturity in a year.
Coupon harvester
Obviously, for more efficient operation of the Coupon Harvester, it is most advisable to use the following criteria for selecting OFZ:
- OFZ with the maximum possible coupon size (at the same time, the OFZ yield itself may be low - this does not play any role)
- OFZ with the closest coupon payment date
- If you plan to use margin lending, then you need OFZs included in the broker’s margin list
Here is the schedule for OFZ coupon payments in 2018:
| Name | maturity date | Coupon size, rub | Months until maturity | Next coupon date |
|---|---|---|---|---|
| OFZ 46023 | 2026.07.23 | 36.62 | 103.4 | 2018.02.01 |
| OFZ 29006 | 2025.01.29 | 52.9 | 85.7 | 2018.02.07 |
| OFZ 46021 | 2018.08.08 | 12.47 | 8.1 | 2018.02.07 |
| OFZ 46020 | 2036.02.06 | 34.41 | 217.6 | 2018.02.14 |
| OFZ 26207 | 2027.02.03 | 40.64 | 109.8 | 2018.02.14 |
| OFZ 52001 | 2023.08.16 | 14.03 | 68.2 | 2018.02.21 |
| OFZ 26215 | 2023.08.16 | 34.9 | 68.2 | 2018.02.21 |
| OFZ 26217 | 2021.08.18 | 37.4 | 44.4 | 2018.02.21 |
| OFZ 46014 | 2018.08.29 | 17.45 | 8.8 | 2018.02.28 |
| OFZ 46018 | 2021.11.24 | 16.21 | 47.6 | 2018.02.28 |
| OFZ 26208 | 2019.02.27 | 37.4 | 14.8 | 2018.02.28 |
| OFZ 29007 | 2027.03.03 | 51.96 | 110.7 | 2018.03.14 |
| OFZ 26204 | 2018.03.15 | 37.4 | 3.3 | 2018.03.15 |
| OFZ 46019 | 2019.03.20 | 8 | 15.4 | 2018.03.21 |
| OFZ 26219 | 2026.09.16 | 38.64 | 105.2 | 2018.03.28 |
| OFZ 26218 | 2031.09.17 | 42.38 | 165.1 | 2018.04.04 |
| OFZ 26221 | 2033.03.23 | 38.39 | 183.2 | 2018.04.11 |
| OFZ 24019 | 2019.10.16 | 45.52 | 22.3 | 2018.04.18 |
| OFZ 29008 | 2029.10.03 | 51.01 | 141.7 | 2018.04.18 |
| OFZ 26205 | 2021.04.14 | 37.9 | 40.2 | 2018.04.18 |
| OFZ 26222 | 2024.10.16 | 35.4 | 82.2 | 2018.04.25 |
| OFZ 26216 | 2019.05.15 | 33.41 | 17.3 | 2018.05.16 |
| OFZ 29009 | 2032.05.05 | 50.11 | 172.7 | 2018.05.23 |
| OFZ 29012 | 2022.11.16 | 44.63 | 59.3 | 2018.05.23 |
| OFZ 26214 | 2020.05.27 | 31.91 | 29.7 | 2018.05.30 |
| OFZ 25083 | 2021.12.15 | 48.33 | 48.3 | 2018.06.20 |
| OFZ 46011 | 2025.08.20 | 99.73 | 92.3 | 2018.08.29 |
| OFZ 46012 | 2029.09.05 | 83.63 | 140.8 | 2018.09.19 |
| OFZ 48001 | 2018.10.31 | 7.58 | 10.9 | 2018.10.31 |
Thus, the question “Which OFZ to buy on IIS” in the light of the strategy under consideration implies completely different answers than were true for the “Buy and Hold” strategy.
conclusions
In fact, there is no big difference which strategy to use. The main profit of the IIS owner comes from tax deductions:
Hence, The easiest way choosing OFZ for IIS implies a refusal to participate in active actions and, and at the moment (the recommendation is valid until 2022) is to purchase OFZ with variable coupon issues 29011 (maturity in 2 years) and 29012 (maturity in approximately 5 years).
If you want to hear other opinions on this issue, .
It is useful for experienced and, especially, novice investors to have information about such an instrument as OFZ - what it is, what kind of income you can get, how to trade. The relevance of these issues is explained by the fact that, as a means of investment in Russia, OFZ is considered one of the most reliable and consistently profitable.
The concept of OFZ
OFZ is an abbreviation for the name Federal Loan Bonds. Actually, this name says almost everything about these securities:
- They represent bonds, i.e. a special type of debt.
- Their issuer is the federal authorities - Government (Ministry of Finance) of the Russian Federation. Accordingly, although, like most bonds, they are issued without collateral, but unlike them they have firm guarantees from the state for timely and full payment of coupon income and repayment.
Accordingly, since it is difficult to even imagine shocks that would force Russia to refuse to pay its obligations, this instrument is considered the standard of reliability among all securities traded on the domestic financial market. As a result, investors often use the OFZ rate as risk-free .
In addition to reliability, these bonds also have other dignity :
- Profitability. Despite the fact that OFZs are essentially a conservative financial instrument from which high returns cannot be expected, the income on them is often higher than that of the traditional investment standard - a bank deposit.
- Liquidity. Federal bonds can be sold by the owner at any time. Due to their reliability and profitability, demand for them always remains high.
- Preservation of accumulated income. For time deposits, a contract option stipulating the loss by the depositor of the amount of accrued interest upon early termination is not uncommon. This cannot happen with OFZs. Regardless of the moment of sale, the seller receives the accumulated coupon income in full.
- Wide choice of options. There are OFZs in circulation with different types of coupons and maturities. This makes it possible, based on the adopted investment strategies, to form an optimal portfolio for any situation.
- Availability. Bonds can be purchased by both legal entities and private investors. At the same time, an additional advantage for the latter is the low threshold for entering the market - a few thousand rubles are enough for the first purchases (the price of most bonds is within 1000 rubles).
- Preferential taxation. Serious tax benefits are provided for individuals - coupon income is exempt from taxes. In addition, OFZ purchases can be made from funds in an individual investment account, which gives the right to tax deductions.
Features of bonds
First of all, you should know that the form of issue of federal loan bonds is documentary. But it is impossible to get these securities in your hands. Accounting, storage, exchange and redemption are entrusted to the Central Bank of the Russian Federation, which maintains an electronic register of owners indicating the numbers of bonds owned. For each issue, a certificate is issued, which is kept by the issuer (Ministry of Finance) and in the trading area depository.
Other features worth noting are:
- OFZ are listed on the Moscow Exchange.
- For bonds of all types, coupon income is accrued daily and paid at a frequency established by the issuer (for most - 2 times a year).
- The cost of purchasing bonds, in addition to part of the par value (market price), includes the accumulated coupon income.
The latter is determined from the relation:
Dkn = K * Tks / Tkp.
- Dkn – current value of accumulated coupon income;
- K – OFZ coupon;
- Tcs – the period of time elapsed until the moment of calculation from the date of the last coupon payment (in days);
- Tkp – time interval between the dates of the last and upcoming coupon payments (frequency of coupon payments in days).
Investors do not need to carry out manual calculations - the current amount is displayed in the terminal window of the trading platform or on online resources that provide information for trading.
This approach allows the seller to receive the entire accumulated coupon income at any time. The buyer will be compensated for these costs when the moment of payment arrives, and the difference between the coupon payment for the reporting period and the coupon amount paid to the seller will become net income.
Classification of federal loan bonds
There are several types of OFZs available on the Russian stock market. They differ:
- Maturity period;
- Method of payment (accrual) of coupon income;
- Repayment method.
By maturity
By maturity, bonds are conventionally divided into:
- Short term – these include securities with a maturity of 1-3 years;
- Medium term , intended for repayment in 3-10 years;
- Long-term , the maturity of which exceeds 10 years.
By method of calculating coupon income
Depending on the type of coupon payments, securities are divided into:
- OFZ-PD(with a constant income). During the circulation period, the coupon remains unchanged.
- OFZ-FD(with a fixed coupon). The coupon value on such bonds changes according to a predetermined algorithm (for example, once every few years there is a decrease, or at different intervals there are predetermined changes).
- OFZ-PK(with floating coupon). The coupon on such bonds is regularly recalculated, since it is tied to certain market indicators. These can be the inflation rate or the weighted rate on overnight ruble loans (RUONIA). The latter is calculated based on data from 31 banks (from September 1, 2017), taken over the last 6 months. Such an indicative index moves along with changes in the market, simultaneously affecting the amount of coupon income. When rates rise, the coupon also increases, making OFZ attractive as an investment instrument.
By repayment method
There are 2 more types of bonds, for which the main feature is the method of repayment:
- OFZ-AD(with debt amortization). Repayment of the nominal value is made in installments, according to a pre-approved schedule.
- OFZ-IN(with denomination indexing). The denomination is recalculated daily, one month in advance. The Ministry of Finance publishes future denomination values for the entire month, at least 2 days before its start.
Calculation of OFZ yield and assessment of profit from investment
When calculating the yield on federal loan bonds, 2 components are taken into account:
- Coupon income calculated depending on the type of securities on the date of payment/sale/redemption.
- Proceeds from sale or redemption. It is obtained due to the difference between the purchase and sale prices or repurchase by the issuer (nominal value).
An average estimate gives a yield level of 7 - 11% per annum for bonds (according to information from the website http://www.rusbonds.ru/). The value is comparable to current deposit rates and even exceeds the current offers of many banks.
However, the result for the private investor is somewhat worse . This is influenced by 2 main factors:
- Income received under OFZ is subject to taxation at the personal income tax rate (13%). Tax is charged on the difference between the purchase and sale (redemption) prices. However, the calculation is not based on the cost of the paper, but on the full price at which the sale was made, including the accumulated coupon income and part of the transaction commission costs. Even the fact that coupon income is not taxed does not improve the picture much.
- Making transactions through a brokerage office is accompanied by payment commissions to the intermediary. Even though its value is insignificant, and the main strategy for OFZs - “buy and hold” - does not involve multiple transactions, the investor suffers losses.
As a result, the profitability of even the TOP bonds on the market becomes comparable to bank deposits. This state of affairs, taking into account the fact that it is much easier to place funds on a bank deposit, scares off a large number of potential investors - individuals.
It turns out to be preferable to invest in OFZ only during times of significant upheaval in the market (due to stability) or a significant reduction in discount rates (then holders of securities with a constant income are clearly the winners).
Private investors should pay attention to the following bonds:
- OFZ 24018-PK. Currently, the profitability estimate in the trading platform terminal gives 10.08%. By the maturity date it will decrease slightly due to the continuing trend of falling rates, but will give a good result.
- OFZ 25081-PD. The current yield is 8.7%, which guarantees results with a constant coupon.
- OFZ 46011-AD. The yield at the end of 2016 was 10.12%, but the partial start of repayment as early as 2020 looks especially attractive.
How to buy OFZ
Federal loan bonds are traded on the Moscow Exchange. For individuals, access to the trading platform is possible only through a broker. Accordingly, the sequence of actions should be as follows:
- Choose a brokerage company, register, enter into an agreement. The selection criteria are reliability, number of accounts serviced, customer reviews, and minimum trading amounts.
- Open an account with a company (or an individual investment account).
- Deposit funds into your account sufficient to purchase the desired volumes of OFZ.
- Install a trading platform terminal (the best option is Quick). For ease of use, you may need to configure the terminal, which is not difficult with the clear interface of the program.
- Analyze the current state of the market, evaluate the profitability and prospects of bonds of various issues.
- In the order book, make a transaction to purchase selected securities
One option for making a profit is to act as a lender. And if the state acts as a debtor, then this investment option is definitely worth considering. OFZ income will exceed bank interest, while the reliability of investments is higher than bank deposits.
What is the return on investment on OFZ
Abbreviation stands for federal loan bonds, they are issued by the state, and any person who bought them acts as a creditor. The yield on OFZ depends on a number of factors, including the expiration date; more on this below.
Among the advantages of this investment method, we note:
- high reliability - only a state default will prevent the fulfillment of debt obligations. The likelihood of this is low, but banks close every year and there is no guarantee that your bank will not suddenly go bankrupt, it will be difficult to return the money;
- profitability is higher than bank interest;
- In addition to coupon payments, the investor can receive income when selling bonds during their expiration. If they trade at a price higher than at the time of purchase, then the difference will be your additional profit. Income from investing in government bonds can exceed 20% per annum under a successful combination of circumstances;
- low entry threshold - the nominal value of the bond is 1000 rubles, everyone can allocate this amount.
There are risks, but they are insignificant and are associated only with the probable default of the state. There are simply no other reasons for non-fulfillment of debt obligations, and You are guaranteed to receive income from OFZ twice a year(most often, coupon payments occur once every six months).
An example of calculating the efficiency of investing in bonds:
- Suppose you decide to buy bonds with an expiration date in 2023 - OFZ 46022. They promise to pay 8.13% per year. At the moment they are sold below face value (89.497% of face value). Investment amount – 100,000 rubles;
- per year, the investor would receive income from the loan bonds at the level of 8.13 x 100,000/100 = 8,130 rubles if the transaction was completed at a bond value of 1,000 rubles. Let's adjust the amount of profit taking into account the lower cost of bonds at the time of purchase 8130/89497 x 100% = 9.08%;
- one more nuance - the government's repayment of these bonds would occur at a price of 1,000 rubles per share, which would provide additional income in the amount of (1,000-894.97)/1,000 x 100% = 10.5%. If we recalculate the additional percentage per year, we get 10.5/6 = 1.75%;
- in total, the real income per year would not be 8.13%, but 9.08 + 1.75 = 10.83%.
This is far from the most profitable investment option. If desired, OFZ income can be increased by approximately 2 times.
How to achieve maximum returns when investing in bonds
Any individual in the Russian Federation can take advantage of the law on investment accounts, which was adopted in 2015. An investor who has invested up to 400,000 rubles for a period of 3 years has the right to take advantage of a tax deduction, i.e. the state will return you 13% of your investment, and as a result, income on federal loans will increase significantly.
If we use the previous example, then in addition to 10.83% per year, the investor will receive + 13% of the investment amount in the form of a tax deduction, i.e. 52,000 rubles per year. Total annual yield on OFZ will be 10.83 + 13 = 23.83%, the bank will never offer this.
As for classification, bonds can be divided by type of payment:
- with fixed payments – dividends are paid once every 6 months until the bonds are redeemed;
- with a variable payment – the payment amount is linked to a floating interest rate;
- with a fixed coupon payment – the volume of OFZ income changes, but the limits of changes are indicated in advance.
There are also differences in the method of repayment of the denomination:
- OFZ-AD - repayment of the par value is made in parts at certain intervals (depreciation of the par value);
- OFZ-IN – nominal indexation, this type is more profitable due to the fact that the income on OFZ of this type is higher than inflation by about 2.5%.
The issue of choosing securities for investment is especially acute - there are many securities issued, the interest rates on them vary greatly, and the expiration date can vary from a couple of months to 10-15 years. Even now you can buy securities with an expiration date around 2034. We We recommend taking into account options with an OFZ income of 8-10% and be sure to take advantage of the opportunity to receive a tax deduction.
Let's present a small list of the most attractive investment options for 2017 and subsequent years. As a criterion, we will choose income from OFZs and tolerable payment terms, i.e. We will not pay attention to securities with maturities after 2030.
29011-PK - with a variable coupon, there were no defaults, the last issue will be in December 2017, the payout percentages are visible in the screenshot. Maturity period – 2020;
29012-PK – also variable coupon payments, the maturity date is set for 2022. The last placement will take place in December 2018;
24019-PK – variable coupon payments, the last placement will take place in December 2018, and redemption will occur in 2019. Each year, investors receive about 10% of the invested amount as income from OFZ;
46014-AD - an option with debt amortization, can be considered as a short-term investment, repayment will occur in 2018, in recent years the yield has fallen to 7%.
OFZ 26204-PD, the letters PD indicate constant income on the coupon. This investment will also yield a return of 7.5% per year. Expiration date is 2019.
| Issue of OFZ 26204-PD maturity in March 2018 | ||||
| Number | Coupon expiration | Coupon term | Percentage per year | RUB rate per region |
| 1 | 22.09.2011 | 183 | 7.5% | 37.60 |
| 2 | 22.03.2012 | 182 | 37.40 | |
| 3 | 20.09.2012 | |||
| 4 | 21.03.2013 | |||
| 5 | 19.09.2013 | |||
| 6 | 20.03.2014 | |||
| 7 | 18.09.2014 | |||
| 8 | 19.03.2015 | |||
| 9 | 17.09.2015 | |||
| 10 | 17.03.2016 | |||
| 11 | 15.09.2016 | |||
| 12 | 16.03.2017 | |||
| 13 | 14.09.2017 | |||
| 14 | 15.03.2018 | |||
A more detailed list can be found on specialized websites, for example, rusbonds.ru, rbc.ru. We will only add that you need to pay attention not only to the income on government loans, but also to such parameters as the reliability of the issuer and the repayment period.
Conclusion
Investing in OFZs can be considered as an excellent analogue of a regular bank account. The investor receives greater profitability, and the risks are much lower, because the state acts as a guarantor of the fulfillment of debt obligations, only in the event of a default, the loan obligations will not be fulfilled. The yield on OFZ (if you use the capabilities of an IIS) can exceed 20% per annum– there is no better solution for low-risk investments.