Part 3: Introduction to Bonds

Bonds are a type of security specified obligations of the issuer (the borrower) to pay for the securities (the lender) an amount of cash, usually within the specific time period, and must repay the original loan when it matures ....

1. The concept is a kind of bond securities specified obligations of the issuer (the borrower) to pay for the securities (the lender) an amount of cash, usually within the specific time period , and must repay the original loan when it matures.

2. Features Diema. A bond usually has three main features: + Denominations.

+ Periodic interest (coupon)

+ Duration.

b. Bonds ties to the creditor - debtor between the issuer and the investor.

Issuing bonds is borrowing. Buying bonds is the issuer of such loans and, bondholders are creditors of the issuer. As creditors, bond holders (bondholders) are entitled to payments under the volume commitments and deadlines, but do not have the right to engage in the issues of the issuer.

c. The interest rate of the bonds are very different, are regulated by these factors:

Supply demand in the credit market. The supply of capital requirements depending on the economic cycle, policy moves of the central bank, the level of the budget deficit and government deficit financing method that.

The risk of each issuer and of each issue. The structure of interest rate risk interest provisions of each bond. The greater the risk, the higher the interest rate.

The maturity of the bonds. If the bonds have the same risk level, generally the longer the maturity, the higher the interest rate.

3. Classification of bonds.

3.1. Based on whether or not to enroll:

 - Anonymous Bonds: Bonds are not entitled bondholders, as well as all the certificates on the books of the issuer. The interest attached sheet stock certificates, and interest payments when due, bondholders and just tore bring bank interest received. When the bond matures, it brings people holding certificates to the bank to get the loan.

- Enrollment Bonds: Bonds that have the name and address of the bondholder, on the certificate and on the books of the issuer. Registration forms can be made only for the principal, may also be enrolled full, both principal and interest. Entire enrollment form which are increasingly popular form of records. Fully registered bonds without material form, ownership was confirmed by the retention of the name and address of the owner on the computer.

3.2. Based on the object that bond issue

Government Bonds: Bonds are issued by the government for the purpose of the budget deficit, funding for public works, or to regulate the monetary tool.

Government bonds are not securities and liquidity risks as well as bonds with higher liquidity. Due to that, the interest rate of government bonds are considered the benchmark interest rate to fixed interest rate basis of other debt instruments of the same maturity.

Works Bonds: Bonds are issued to raise funds for a specific purpose, usually to build infrastructure projects or public welfare projects. Bonds may be caused by the central government or local government issued.

Corporate bonds: These bonds issued by the company to long-term loans. Corporate bonds have the following common characteristics:

Bondholders are paying periodic interest and repay principal at maturity, but not participate in the company's decision. But there are no bonds pay periodic interest, the buyer is buying under par at maturity and get back the face value.

When corporate dissolution or liquidation, bond prepayment priority shares.

There are specific conditions attached, or a guarantee for the loan.

Corporate bonds include the following categories

Secured Bonds: Bonds are guaranteed by specific collateral, usually real estate and equipment. The bond holders are protected at a high level in the case of bankruptcy of the company, because they have a debt claim against specific assets.

Bonds are not secured:

Unsecured bonds are not secured by assets that are secured by the trust company. If the company goes bankrupt, the bondholders of bonds to be addressed after the interests of unsecured bondholders, but not before the crowd.

The bonds are convertible unsecured bondholders may allow transfer of bonds into common stock of the issuing company. Depending on the rules, the transformation can be carried out at any time, or only at specific times determined.

In addition to these characteristics, each round of bonds to be issued may be associated with other individual characteristics to meet specific needs of a particular party. Specifically:

- Be able to buy bonds allow the issuer to repurchase before maturity when necessary. This feature is beneficial for the issuer but are detrimental to investors, so bonds may have higher interest rates than other bonds of the same duration.

- The bonds can be sold to: allow bond holders may sell bonds to the issuer before maturity bonds. Autonomy in this case belongs to the investors, so the bond's interest rate may be lower than other bonds of the same duration.

- Bonds can convert it allows holders may convert bonds into ordinary shares, ie changing from the creditor becomes the owner of the company. This bond belonging to the group of goods can convert securities are mentioned below.

4. Benefits of investment through bonds

- Despite losing, the company has enough cash to pay interest, do not cut or remove such shares. If the company stopped operations, asset liquidation, bondholders are paid before the preference shares and ordinary shares. But if the company is profitable, companies may share dividend for more people share, the bond holders still have to get at.

- Bonds are tax-exempt types of income (government bonds, local government bonds). For those who have high incomes, buying bonds is beneficial.

- Bonds in the secondary market prices rise and fall inversely with interest rates on the market. If that analysis to calculate the sales performance is still beneficial.

5. Unfavorable investment bonds

- Upon receipt of interest to investors worried that money because very few companies have programs reinvested interest bonds. Meanwhile, many companies have programs reinvested dividends. Shareholders can buy more shares free of charge basis, and are even allowed to buy shares cheaply than the market price.

- Prices of corporate bonds have fluctuated sharply in the market: the market interest rates higher bond yields, the bond price will be lower. When rating agencies classified business, issuers rated from AAA (3A) to AA (2A) or to the BBB (3B), the bond price will be lower. Or when there is a loss of market, default ... then bond prices will be ha.Va bond prices will fall as fewer people buy.

6. When bond investors should note what?

Before buying bonds need to understand two things: up and down direction of interest rates and the reputation of the issuer.

So buy bonds at interest rates are at the highest point and is on the decline. And should buy long-term bonds in order to receive higher interest rates for a long time. Conversely, when interest rates are low and start up, to sell long-term bonds to buy bonds to medium term.

Part 1: Summary of Stock

Part 2: Introduction to stocks

Part 3: Introduction to Bonds

Part 4: Stock may convert

Part 5: Derivatives

Part 6: Primary Market

Part 7: First Issue of securities to the public (IPO)

Section 8: Process initial issuance of securities to the public

Section 9: Underwriting