In bloom the purchase of corporate bonds as an alternative source of capital for Greek business

The market is growing rapidly on the Athens Stock Exchange and are currently negotiating bonds, coming from all the nerve and dynamic branches of Greek. The domestic bond market is strengthened and 24 issues are currently being negotiated through which 4.6 billion euros were raised for Greek companies. In the first two months of 2024 the value of transactions in the bond market doubled compared to 2023 (formed at EUR 1.8 million) and in general it turns out that corporate bonds are a strong option for easy and quick financing with cheap funds for businesses and for satisfactory returns for investors. According to recent data from PwC Greece, for 2023, they amounted to 601m euros, through negotiable corporate bonds, while in 2022 530m was drawn for the issue of 4 corporate bonds. The publication of the 7-year counterpart of Mytilene 500 million in July 2023 “restore” the corporate bond market and most importantly, 91.2% of the bonds were directed to private investors. In December 2023 Ideal issued a 5-year Euro100 million bond with a 5.5% coupon. In 2024 it opened with two public bond issues listed, Autohellas and Intralot, drawing EUR 200 million and EUR 130 million respectively. The alternative investment Corporate bonds, listed on the Athens Stock Exchange with expirations from 3 to 7 years and indicative returns from 3.75% to 6.75% are directly competitive of deposits, even for futures. Although the Greek stock market offers high yields and estimates are particularly positive for the continuation, investors who do not want a high risk of investing in shares can also invest in the stock market. The advantages of investing in corporate bonds are: Attractive Odds : With forward deposits having retreated from previous years’ levels, investors can differentiate the money they have aside by placing a portion of their available money into corporate bonds that pronounce more attractive returns. Regular Income : Investors who wish to have a, as far as possible, stable return in the form of a fixed payment flow each year from coupons, can use corporate bonds to have a regular income. At the same time they expect the repayment of the capital invested to expire. Dissemination : The spread of part of an investor’s portfolio into more corporate bonds of different companies and sectors is achieved by reducing the total risk of investment. As in all bonds, in corporate bonds their price increases if interest rates are reduced and vice versa, their price is reduced if interest rates are raised. Also, the longer the maturity of the bond, the greater the impact on the change in the bond price. In other words, two bonds with the same fixed interest rate and different maturity periods have different behaviour in the event of a change in interest rates. The longer maturation bond usually shows the greater change. However, where an investor has purchased a bond and intends to keep it until its expiry, it should not be affected by interest rate changes since it is given that it will be repaid to the nominal value of the bond. When interest rates are increased, new corporate bond issues are expected to come to the market with higher returns than those of the older ones, so the prices of older issues decline. When interest rates are reduced, new corporate bond issues are expected to come to the market with smaller returns than those of the older ones, so the prices of older issues are rising. It is therefore particularly important for an investor to know that the sale or purchase price of corporate bonds before maturity may be lower or higher than the nominal value of the bond at maturity. Performance Performance is the most important concept that anyone invests in corporate bonds because it is what differentiates investment in bonds and allows investment decisions to be made. In essence, the return reflects the profit or loss rate on the bond market, which is based on the purchase price and interest that the investor will obtain through coupons. In practice, performance changes by monitoring the change in the bond price. For example, one buys a fixed coupon bond and keeps it for 1 year, during which interest rates go up, and then sells it. On the basis of the above, the sales price should be lower than the market price. Although the investor who buys it will collect a coupon in euros the same as we who sold it to him and will receive at the end the same denomination, the buyer’s return is higher than ours because, simply, he bought the bond at a price lower than we bought it. There is a large number of efficiency measures that each have advantages and disadvantages. Three useful measures are: 1. Current yield (current yield) relates the amount of the coupon to the purchase price of the bond and is expressed as a percentage of 100 %. It is calculated as : C y = — P , where C is the amount of coupon in euro and P is the purchase price of the bond. If we buy a bond at its nominal value , i.e. at 100, then its current yield is identical to the interest rate : the current return on a bond with a coupon of 7.25% that we buy at its nominal value is 7.25%. If the bond price is less than 100 and the bond is traded in discount, then its current performance is greater than the coupon. Example in an 8-year corporate bond 7% whose purchase price is 94.17 : The coupon in euro is : 7% x Euro100 = Euro7. The price is Euro94.17 Current performance is 7/94.17 = 7.43% If the bond price is greater than 100 and the bond is traded in premium then its current performance is less than the coupon. The disadvantage of the current return is that it takes into account only the bond coupon and no other source of gain or loss from goodwill, time of keeping the bond and reinvestment of the coupon. Therefore, investors should not buy or sell bonds on the basis of only this efficiency measure. 2. Yield to maturity is the annualised return that yields a bond from the purchase date to the expiry date and is expressed as a percentage of 100 % . It is the most common measure of return because it gives information on the overall return the investor will have if he keeps the bond until the end. Thus, it allows us to compare bonds with different endings and different coupons in a single way. The return on maturity includes all coupons expected to be paid by maturity as well as the gain from goodwill that the investor will have if he buys the bonds at a price below nominal value (i.e. at discount) or loss from goodwill if he buys the bonds at a price above nominal value (i.e. at premium). This is the most widely used efficiency measure, and takes into account the reinvestment of the coupon based on but the efficiency at the end. 3. The return on the date of acquisition (yield to call) is the return yielding a bond from the date of purchase to the date of acquisition by its issuer and expressed as a percentage of 100 %. Since under the terms of the contract a bond may be able to be repaid earlier than its expiry date, it is useful to set a return measure based on the timetable of repayments, in particular the first. How the investor can acquire corporate bonds Investors can acquire bonds just as shares, with the same simple and easy process, through the existing network of Athens Exchange Members. A necessary condition is to have a share of an investor in the UAE SAT. For new investors the process can be summarised in 4 simple steps: Cooperation of the investor with the stock company or the custodian (manager) of his choice. Create and return a customer code (OASIS code) to the investor by the stock company/manager for participation in the issue of bonds or conduct of transactions on the Athens Stock Exchange. An investor’s request to the operator to create a share of an investor and a securities account in the SAT to clear and settle its transactions. The portion contains the investor’s identification and the value account contains its domestic and foreign values. Investors can buy or sell bonds by giving a simple command to their operator. Source: RES – ICM

Exit mobile version