Greetings! Bonds are a unique security that can generate several types of income at once: coupons, difference in price at maturity, and even indexation.
Almost all Russian bonds provide for regular coupon payments. So, coupon income for bonds this is a small but regular cash flow. Which will certainly not be superfluous in a crisis.
Have you heard the expression: “coupon clipping”? This is just about bonds and their income part. Previously, bonds were issued in paper form. And the coupon served as a cut-off part, which was exchanged for a cash premium on the bond.
Today, of course, no one cuts off coupons anymore. Most debt securities are issued in in electronic format and exists in the form of digital entries in accounts. But the historical name “coupon income” stuck.
The coupon rate is the annual percentage of the yield on the face value of the bond. For example, if the coupon rate is 12% per annum, and the bond costs 1,000 rubles, then the owner of the bond will receive a coupon income of 120 rubles per year. It's simple!
In Russia, coupons are usually paid twice a year. Therefore, the owner of the bond in the hypothetical example will receive 60 rubles twice. And even if you decide to sell the paper without waiting for payment, the interest accumulated during ownership will still fall into your pocket. After all, unlike bank deposit The mechanism is at work here!
Note! The coupon rate is always applied to the face value of the bond! Even if by the time of maturity the bond price falls to 500 or rises to 2,000 rubles, 6% per annum will still be charged on the nominal thousand.
Coupon payment options
Fixed permanent coupon
The coupon size as a percentage is known in advance. From the date of placement until maturity, its value does not change.
Example. Bond federal loan"OFZ-26217-PD" with a circulation period of 2121 days with a coupon of 7.5% per annum. The coupon is paid twice a year.
Fixed variable coupon
The coupon yield is only partially known in advance. In the coupon payment schedule, the issuer enters the value of the rates until a certain date. After which the size of the new coupon is determined: either it changes or remains the same.
Example. “Sberbank-17-bob” with a circulation period of 1826 days. The coupon is paid every six months. Initially, the coupon was fixed at 10% per annum (for the first coupon period).
At the end of the first half of the year, a note appeared in the “Coupons” section (website http://www.rusbonds.ru): “The rate of coupons 2-4 is equal to the rate of the 1st coupon.” This means that for the next three coupon periods (second, third and fourth) the rate is fixed at 10% per annum.
After April 8, 2018 (end date of the fourth period), the coupon size of the BO-17 series will be revised again.
Floating (indexed) coupon
In such bonds, the coupon rate is constantly changing because it is tied to some indicator.
The coupon rate may depend on:
- Dollar exchange rate
- Index consumer prices(inflation rate)
- Central Bank key rate
- RUONIA bets
Example No. 1. "AHML-13-ob" with a circulation period of 3153 days (since August 27, 2009). The coupon is paid twice a year. On the Rusbonds website we are looking for AHML-13-ob bonds. and go to the “Coupons” section.
The note says: “The coupon size is equal to the refinancing rate one business day before the end of the coupon period and a premium of 2.5%, but not more than 20%.” The calculation formula is tied to the refinancing rate - the higher it is, the higher the coupon yield.
In the column “Rate % per annum” we see how the coupon size has changed since mid-2010. In certain coupon periods, AHML bondholders received 12.5% and even 13.25%. And during periods of lower refinancing rates, bond yields fell to 10.25-10.75% per annum.
Example No. 2. "RZD-10-bob" with a circulation period of 5460 days. The coupon is paid twice a year. The note to the “Coupons” section states that the rate of 2-30 coupons (that is, from the second to the thirtieth period) is calculated as the annual inflation rate plus 1% per annum.
In the section “Rate % per annum” we see that in different coupon periods the size of coupons was different: from 7.5% (in 2014) to 17.4% (at the end of 2015).
Coupon income and taxes
The bond holder pays personal income tax in the amount of 13% of:
- Coupon amounts
- Positive difference between purchase and sale prices
Coupons for federal loan bonds and municipal bonds (unlike securities of the same Gazprom or Sberbank) are exempt from taxation. Plus(!) you can save on taxes using an IIS. If you buy a bond and do not sell it within three years, you are entitled to a 13% tax deduction.
Which coupon should I choose?
The bond market is conventionally divided into two large segments: low-risk and high-risk bonds. The first include OFZs and municipal bonds. The second category includes corporate bonds of companies of the second and third echelons. The category of the issuer is determined using. Now I will not go into detail about how exactly this happens, perhaps in the future I will make a separate article on this subject...
But in any case, bonds are a conservative instrument that is not suitable for active speculation. Investments in bonds are usually thought of when you need to ride out a “storm” in the stock market or during periods of high market volatility.
Fixed coupon bonds provide a safe haven in case of panic. A small but constant coupon is guaranteed. If the market expects rates to rise, then bonds with a variable coupon look more attractive.
The best option is to make up several types of bonds. For example: short-term bonds for current savings, corporate bonds with high yield for 2-3 years and Eurobonds for protection against currency risks.
What bonds do you invest in? Subscribe to updates and share links to the latest posts with your friends on social networks!
P.S. By the way, for those who like to tickle their nerves, there is a very high-risk strategy - "Junk Bonds"(literally - Junk bonds). But I'll tell you about it another time.
The material uses slides from the Moscow Exchange presentation.
Let me start with the fact that if you want to find out the accumulated coupon income for the current date, you can always look it up on the Moscow Exchange website moex.com or on the Interfax agency website rusbond.ru
You should not be surprised by the fact that the NKD values on the Moscow Exchange website and the NKD values on the Interfax agency website differ from each other. This is due to the trading regime on the Moscow Exchange. Federal loan bonds are traded in T+ mode, that is, with settlements postponed to the next trading day. Therefore, the NKD on the exchange website for OFZ is always greater than the value on the Interfax agency website.
Important afterword
The calculation method presented in the article is not suitable for all bonds. The number of days of the coupon period can be calculated on different bases. I recently came across a manual with a method for calculating bond yields and accumulated coupon income on the Moscow Exchange website. I don’t remember in which section of the exchange portal I found it, so I’m posting it here for free download.
In the archive offered for download, in addition to the methodology, I have attached an Excel file with plotting charts for stocks. Here is the download link: Methodology for calculating accrual income and profitability download
I will be glad to see your opinions and personal experience in the field of bonds when you share them in the comments to this article. I will also be glad to have questions and I will try to find answers to them, or maybe they are already known to me - ask questions in the comments to the article, don’t be shy, I will answer everyone.
That's all for today, my dear readers.
What would you like to achieve? investing in bonds? Save money and get extra income? Saving for an important goal? Or maybe you dream about how to gain financial freedom with the help of these investments? Whatever your goal, it's worth understanding how much income your bonds generate and being able to differentiate good investment from bad. There are several principles for assessing income, knowledge of which will help with this.
What types of income do bonds have?
Bond yield- this is the amount of income as a percentage received by an investor from investing in a debt security. Interest income according to them, it is formed from two sources. On the one hand, fixed coupon bonds, like deposits, have interest rate, which is charged on the face value. On the other hand, have bonds, like stocks, have a price, which may change depending on market factors and the situation in the company. True, changes in the price of bonds are less significant than those of stocks.
Total bond yield includes coupon yield and takes into account its acquisition price. In practice, different profitability estimates are used for different purposes. Some of them only show coupon yield, others additionally take into account purchase price, still others show return on investment depending on tenure- before sale on the market or before redemption by the issuer who issued the bond.
To make the right investment decisions, you need to understand what types of bond returns there are and what they show. There are three types of returns, the management of which turns an ordinary investor into a successful rentier. These are the current yield from interest on coupons, the yield on sale and the yield on securities to maturity.
What does the coupon rate indicate?
Coupon rate is the base percentage of the bond's face value, also called coupon yield . The issuer announces this rate in advance and periodically pays it on time. Coupon period for most Russian bonds - six months or a quarter. Important nuance is that the coupon yield on the bond is accrued daily, and the investor will not lose it even if he sells the paper ahead of schedule.
If a bond purchase and sale transaction occurs within the coupon period, then the buyer pays the seller the amount of interest accumulated from the date of the last coupon payments. The amount of this interest is called accumulated coupon income(NKD) and added to current market price of the bond. At the end of the coupon period, the buyer will receive the coupon in its entirety and thus compensate for his expenses associated with the refund of the tax return. to the previous owner bonds.
Exchange bond quotes from many brokers show the so-called net price of the bond, excluding NKD. However, when an investor orders a purchase, the NCD will be added to the net price, and the bond may suddenly be worth more than expected.
When comparing bond quotes in trading systems, online stores and applications of different brokers, find out what price they indicate: net or with income tax. After this, estimate the final costs of the purchase in one or another brokerage company, taking into account all costs, and find out how much money will be debited from your account if you purchase securities.
Coupon yield
As the accumulated coupon yield (ACY) increases, the value of the bond increases. After the coupon is paid, the cost is reduced by the amount of the NKD.
NKD- accumulated coupon income
WITH(coupon) - amount of coupon payments for the year, in rubles
t(time) - number of days from the beginning of the coupon period
Example: the investor bought a bond with a par value of 1000 rubles with a semi-annual coupon rate of 8% per year, which means a payment of 80 rubles per year, the transaction took place on the 90th day of the coupon period. His additional payment to the previous owner: NKD = 80 * 90 / 365 = 19.7 ₽
Is the coupon yield the investor's interest?
Not really. Every coupon period the investor receives a certain amount of interest in relation to face value bonds to the account that he indicated when concluding an agreement with the broker. However, the real interest that an investor receives on invested funds depends on bond purchase prices.
If the purchase price was higher or lower than face value, then profitability will differ from the base coupon rate set by the issuer in relation to the face value of the bond. The easiest way to evaluate real investment income- correlate the coupon rate with the purchase price of the bond using the current yield formula.
From the presented calculations using this formula, it can be seen that profitability and price are related to each other by inverse proportionality. An investor receives a lower yield to maturity than the coupon when he purchases a bond at a price higher than its face value.
C.Y.
C g (coupon) - coupon payments for the year, in rubles
P(price) - purchase price of the bond
Example: the investor bought a bond with a par value of 1000 rubles at a net price of 1050 rubles or 105% of the par value and a coupon rate of 8%, that is, 80 rubles per year. Current yield: CY = (80 / 1050) * 100% = 7.6% per annum.
Yields fell - prices rose. I'm not kidding?
This is true. However, for novice investors who do not clearly understand the difference between return to sale And yield to maturity, this is often a difficult moment. Considering bonds as a portfolio investment assets, then its profitability for sale in the event of a price increase, like that of shares, will, of course, increase. But the bond yield to maturity will change differently.
The whole point is that a bond is a debt obligation, which can be compared with a deposit. In both cases, when purchasing a bond or placing money on deposit, the investor actually acquires the right to a stream of payments with a certain yield to maturity.
As you know, interest rates on deposits rise for new depositors when money depreciates due to inflation. Also, the yield to maturity of a bond always rises when its price falls. The reverse is also true: the yield to maturity falls when the price rises.
Beginners who evaluate the benefits of bonds based on comparisons with stocks may come to another erroneous conclusion. For example: when the price of a bond has increased, say, to 105% and has become more than the face value, then it is not profitable to buy it, because when the principal is repaid, only 100% will be returned.
In fact, it is not the price that is important, but bond yield- a key parameter for assessing its attractiveness. Market participants, when bidding for a bond, agree only on its yield. Bond price is a derived parameter from profitability. In effect, it adjusts the fixed coupon rate to the rate of return that the buyer and seller have agreed upon.
See how the yield and price of a bond are related in the video of the Khan Academy, an educational project created with money from Google and the Bill and Melinda Gates Foundation.
What will be the yield when selling the bond?
The current yield shows the ratio of coupon payments to the market price of the bond. This indicator does not take into account the investor's income from changes in its price upon redemption or sale. To evaluate financial results, you need to calculate a simple yield, which includes a discount or premium to the face value when purchasing:
Y(yield) - simple yield to maturity/put
C.Y.(current yield) - current yield, from the coupon
N
P(price) - purchase price
t(time) - time from purchase to redemption/sale
365/t- multiplier for converting price changes into percentage per annum.
Example 1: an investor purchased a two-year bond with a par value of RUB 1,000 at a price of RUB 1,050 with a coupon rate of 8% per annum and a current coupon yield of 7.6%. Simple yield to maturity: Y 1 = 7.6% + ((1000-1050)/1050) * 365/730 *100% = 5.2% per annum
Example 2: The issuer's rating was increased 90 days after purchasing the bond, after which the price of the security rose to 1,070 rubles, so the investor decided to sell it. In the formula, let's replace the par value of the bond with its sale price, and the maturity date with the holding period. We get simple return on sale: Y 2 7.6% + ((1070-1050)/1050) * 365/90 *100% = 15.3% per annum
Example 3: The buyer of a bond sold by a previous investor paid 1,070 rubles for it - more than it cost 90 days ago. Since the price of the bond has increased, the simple yield to maturity for the new investor will no longer be 5.2%, but less: Y 3 = 7.5% + ((1000-1070)/1070) * 365/640 * 100% = 3 .7% per annum
In our example, the bond price increased by 1.9% over 90 days. In terms of annual yield, this already amounted to a serious increase in interest payments on the coupon - 7.72% per annum. With a relatively small change in price, bonds over a short period of time can show a sharp jump in profit for the investor.
After selling the bond, the investor may not receive the same 1.9% return for every three months within a year. Nevertheless, profitability converted into annual percentages, is an important indicator characterizing current cash flow investor. With its help, you can make a decision on early sale of a bond.
Let's consider the opposite situation: as yields rise, the price of the bond decreases slightly. In this case, the investor may receive a loss upon early sale. However, the current yield from coupon payments, as can be seen in the above formula, will most likely cover this loss, and then the investor will still be in the black.
The lowest risk of losing invested funds during early sale is bonds of reliable companies with a short period until maturity or redemption under an offer. Strong fluctuations in them can be observed, as a rule, only during periods economic crisis. However, their exchange rate recovers fairly quickly as the economic situation improves or the maturity date approaches.
Transactions with safer bonds mean lower risks for the investor, but also yield to maturity or offer it will be lower on them. This general rule the relationship between risk and return, which also applies to the purchase and sale of bonds.
How to get the maximum benefit from a sale?
So, as the price rises, the bond's yield falls. Therefore, to get the maximum benefit from rising prices When selling early, you need to choose bonds whose yield may decrease the most. Such dynamics are usually shown by securities of issuers that have the potential to improve their financial situation and improving credit ratings.
Large changes in yield and price can also be seen in bonds with long term to maturity. In other words, long bonds are more volatile. The thing is that long bonds generate a larger cash flow for investors, which has a greater impact on price changes. It is easiest to illustrate how this happens using the same deposits as an example.
Suppose an investor a year ago deposited money at a rate of 10% per annum for three years. And now the bank accepts money for new deposits at 8%. If our depositor could assign the deposit, like a bond, to another investor, then the buyer would have to pay the difference of 2% for each remaining year of the deposit agreement. Additional payment in in this case would be 2 g * 2% = 4% on top of monetary amount in the contribution. For a bond purchased under the same conditions, the price would increase to approximately 104% of the par value. The longer the term, the higher the additional payment for the bond.
Thus, the investor will receive more profit from the sale of bonds if he chooses long papers with fixed coupon when rates in the economy decrease. If interest rates, on the contrary, rise, then holding long bonds becomes unprofitable. In this case, it is better to pay attention to securities with a fixed coupon that have short maturity, or bonds with floating rate .
What is the effective yield to maturity?
Effective yield to maturity- this is the investor’s total income from investments in bonds, taking into account the reinvestment of coupons at the rate of the initial investment. To estimate the full yield to maturity of a bond or its redemption under an offer, use the standard investment indicator - internal rate of return cash flow . She shows average annual return on investment taking into account payments to the investor over different periods of time. In other words, this return on investment in bonds.
You can independently calculate the estimated effective profitability using a simplified formula. The calculation error will be tenths of a percent. The exact yield will be slightly higher if the purchase price exceeded the par value, and slightly less if it was below the par value.
YTM OR (Yield to maturity) - yield to maturity, approximate
C g (coupon) - the amount of coupon payments for the year, in rubles
P(price) - current market price of the bond
N(nominal) - bond face value
t(time) - years to maturity
Example 1: the investor purchased a two-year bond with a par value of 1000 at a price of 1050 rubles with a coupon rate of 8% per annum. Estimated effective yield to maturity: YTM 1 = ((1000 – 1050)/(730/365) + 80) / (1000 + 1050) / 2 * 100% = 5.4% per annum
Example 2: the issuer's rating was increased 90 days after purchasing the bond, and its price increased to 1,070 rubles, after which the investor decided to sell the bond. In the formula, let's replace the par value of the bond with its sale price, and the maturity date with the holding period. Let's get the approximate effective yield for sale (horizon yield): HY 2 = ((1070 – 1050)/(90/365) + 80) / (1000 + 1050) / 2 * 100% = 15.7% per annum
Example 3: The buyer of a bond sold by a previous investor paid 1,070 rubles for it - more than it cost 90 days ago. Since the price of the bond has increased, the effective yield to maturity for the new investor will no longer be 5.4%, but less: YTM 3 = ((1000 – 1070)/(640/365) + 80) / (1000 + 1050) / 2 * 100% = 3.9% per annum
The easiest way to find out the effective yield to maturity for a particular bond is to use bond calculator on the website Rusbonds.ru. An accurate calculation of effective profitability can also be obtained using financial calculator or Excel programs through the special function “ internal rate of return"and its varieties (XIRR). These calculators will calculate the rate effective yield according to the formula below. It is calculated approximately using the method of automatic selection of numbers.
How to find out the yield of a bond, watch the video from the Higher School of Economics with Professor Nikolai Berzon.
The most important!
✔ The key parameter of a bond is its yield, the price is a derived parameter from the yield.
✔ When a bond's yield falls, its price rises. And vice versa: when yields rise, the price of the bond falls.
✔ You can compare comparable things. For example, the net price without taking into account the accrued income - with the net price of the bond, and full price with NKD - with full. This comparison will help you make a decision when choosing a broker.
✔ Short one- and two-year bonds are more stable and less dependent on market fluctuations: investors can wait for the maturity date or repurchase by the issuer under an offer.
✔ Long bonds with a fixed coupon allow you to earn more by selling them when rates in the economy drop.
✔ A successful rentier can receive three types of income from bonds: from coupon payments, from changes in the market price upon sale, or from reimbursement of the face value upon redemption.
An intelligible dictionary of terms and definitions of the bond market. A reference base for Russian investors, depositors and rentiers.
Discount Bond- discount to the face value of the bond. A bond whose price is below par is said to be selling at a discount. This occurs if the seller and buyer of the bond have agreed on a higher rate of return than the coupon set by the issuer.
Coupon yield of bonds- this is the annual interest rate that the issuer pays for the use of borrowed funds raised from investors through the issue of securities. Coupon income is accrued daily and calculated at a rate based on the face value of the bond. The coupon rate can be constant, fixed or floating.
Bond coupon period- the period of time after which investors receive interest accrued on the nominal value securities. The coupon period of most Russian bonds is a quarter or six months, less often - a month or a year.
Bond Premium- an increase to the face value of the bond. A bond whose price is higher than its face value is said to sell at a premium. This occurs if the seller and buyer of the bond have agreed on a lower rate of return than the coupon set by the issuer.
Simple yield to maturity/offer- calculated as the sum of the current yield from the coupon and the yield from the discount or premium to the face value of the bond, as a percentage per annum. Simple yield shows an investor the return on an investment without reinvesting coupons.
Simple return to sale- calculated as the sum of the current yield from the coupon and the yield from the discount or premium to the sale price of the bond, as a percentage per annum. Since this yield depends on the price of the bond at sale, it can differ greatly from the yield to maturity.
Current yield, from coupon- calculated by dividing the annual cash flow from coupons by market price bonds. If you use the purchase price of the bond, the resulting figure will show the investor the annual return on his cash flow from coupons on the investment.
Full bond price- the sum of the market price of the bond as a percentage of the nominal value and the accumulated coupon income (ACI). This is the price an investor will pay when purchasing the paper. The investor compensates for the costs of paying the NKD at the end of the coupon period, when he receives the coupon in full.
Bond price net- the market price of the bond as a percentage of the nominal value without taking into account the accumulated coupon income. It is this price that the investor sees in the trading terminal; it is used to calculate the return received by the investor on the invested funds.
Effective yield to maturity/put- average annual return on initial investments in bonds, taking into account all payments to the investor over different periods of time, redemption of par value and income from reinvestment of coupons at the rate of initial investments. To calculate profitability, the investment formula for the rate of internal return on cash flow is used.
Effective return on sale- average annual return on initial investments in bonds, taking into account all payments to the investor over different periods of time, proceeds from sales and income from reinvestment of coupons at the initial investment rate. The effective yield on sale shows the return on investment in bonds for a certain period.
Definition of the term coupon income
Coupon income for corporate bonds
How to calculate coupon income
General procedure for reflecting coupon income in the tax return.
Accounting for accumulative coupon income on government securities.
Definition of the term coupon income
Coupon is profit on government savings loan coupon bonds.
Accumulated coupon income (ACI) is part of the coupon interest benefits on the bond, calculated in proportion to the number of days that have passed from the date money issue coupon bond or the date of payment of the previous coupon income.
The formula for calculating the income tax implies the need to calculate the number of calendar days from one date to another or the duration of the period determined by two dates. Depending on the type of bond, there are several bases for calculating these indicators, for example “365/366”, when the duration period from date T1 to date T2 is defined as the difference in dates: T2 - T1.
The amount of accumulated coupon income can be expressed through the size of the coupon in monetary units or through a bet coupon in percentage and face value.
The standard formula for calculating the ACI on Russian bonds from the rate is as follows:
N - nominal
C - current rate coupon(V percent per annum)
T - number of days from the start of the coupon period to current date
B - calculation base (365 days)
Profit coupon accumulated - part of the coupon income calculated at the face value of the bond and in proportion to the number of days that have passed from the date issue of securities bonds or the date of payment of the previous coupon income.
Coupon income on corporate bonds
Bonds are a type of valuable securities, the owners of which have the right to receive from the issuer their nominal price, as well as the interest (coupon) profit declared on them. When bonds are sold, coupon income is included in price their sales. The article highlights the features tax accounting coupon yield on corporate bonds, and explains the procedure for filling out income tax returns by bondholders.
According to paragraph 3 of Article 43 of the Tax Code of the Russian Federation under percentage means any pre-declared (established) profit, including in the form of a discount, received by debt obligation of any type, regardless of the method of its design. That part of the interest (coupon) profit, the payment of which is provided for by the terms emissions security, and the amount is calculated in proportion to the number of days that have passed from the date of issue securities or the date of payment of the previous coupon income before the date of completion of the contract (date of transfer securities), is called the accumulated interest (coupon) benefit (ACB). This definition is given in paragraph 4 of Article 280 of the Tax Code RF. The calculation of the income tax is carried out by the owners of state and municipal securities, as well as corporate bonds, issuer which is not a company, but a company.
Before moving on to the issue of calculating income tax and the procedure for reflecting income on corporate bonds in the tax return income tax, let's stop at general rules tax accounting of coupon income.
Procedure for tax accounting of interest (coupon) profit
According to paragraph 6 of Article 250, interest (including discount) received on securities is recognized as non-operating benefits. Features of maintaining tax accounting of income (expenses) in the form of interest on securities are established by Article 328 of the Tax Code RF. Paragraph 1 of this article provides that the taxpayer, on the basis of analytical accounting non-operating income And costs decrypts income ( costs) in the form of percentages for different debt obligations. For securities income(expenses) are reflected in the amount of interest due in accordance with the terms of the securities issue.
Bondholders take into account in analytical accounting the amount of benefit in the form of interest (coupon) based on the yield established for this type of bond and the validity period of these debt obligations in the reporting period.
Taxpayers using the accrual method1 determine the date of recognition of profit on securities based on paragraph 6 of Article 271 of the Tax Code of the Russian Federation. If the validity period of a debt obligation (the maturity of a security) falls on more than one reporting period, then for tax purposes the profit is recognized as received and is reflected in the tax base at the end of the corresponding reporting period. When a debt obligation (sale of a security) is repaid before the end of the reporting period, profit is recognized on the date of repayment of the debt obligation (sale of a security).
Interest (coupon) profit received by the owners of securities when calculating income tax taxed at a rate of 24%.
How to calculate coupon income. IN Tax Code, namely in paragraph 7 of Article 328, the procedure for tax accounting of income tax on state and municipal securities traded on the organized securities market (ORSM) is spelled out in detail. And for corporate bonds in code There are no special rules. The question arises: is it possible to apply the provisions of paragraph 7 of Article 328 code for accounting for accrued income on corporate bonds? To answer this question, let's compare these types of securities.
Government (municipal) securities and corporate bonds are very similar in terms of the rules of issue and circulation. Both for state and municipal securities, and for corporate bonds when they are issued in mandatory coupon income is announced in advance. This profit is accrued at certain intervals issuer and is paid to the owners of securities according to the rules stated during the cash issue. When selling both securities, the tax accrual is included in the price agreements. All this gives grounds to apply to corporate bonds the same rules that are provided for in paragraph 7 of Article 328 of the Tax Code of the Russian Federation for accounting for coupon income on state and municipal securities.
Let us consider in detail how the interest (coupon) profit on corporate bonds is calculated by taxpayers using the accrual method.
Those who owned bonds during the reporting (tax) period must calculate the interest (coupon) profit on them and reflect it in tax accounting. If at the end of the reporting (tax) period it is not realized, then the taxpayer is obliged on the last day of the reporting (tax) period to accrue the amount of interest profit due on this security for this period.
Interest (coupon) profit on corporate bonds is calculated as follows:
or in the form of the difference between the amount of income tax calculated at the end of the reporting (tax) period in accordance with the terms of the issue of securities, and the amount of income tax calculated at the end of the previous reporting (tax) period;
either in the form differences between the amount of accrued income calculated at the end of the reporting (tax) period in accordance with the terms of the issue, and the amount of accrued income paid when purchasing the security.
or by determining the amount of interest for the actual time the security is on the balance sheet companies.
This procedure for calculating coupon income applies if you have not made interest payments (coupon redemption) for the current reporting (tax) period.
Organization“Beta” purchased on December 11, 2003 for 1040 rubles. (including NKD - 40 rubles) corporate bond issued by the issuer "Alpha". The bond issue parameters are as follows:
The nominal value of the bond is 1000 rubles;
The coupon according to the terms of the money issue is 366 rubles. per year (that is, 1 rub. for one day);
IN accounting policy the Beta organization has established that income and expenses are determined on an accrual basis, and the reporting period for tax purposes is a quarter, half a year, 9 months.
At the end of 2003, the amount of accrued income on the bond was 61 rubles. (1 ruble per 61 days from the date of bond issue - November 1, 2003 until the end of the year - December 31, 2003).
The amount of non-operating benefit in the form of interest (coupon) profit on the bond for 2003 was calculated as follows:
61 rub. - 40 rub. = 21 rub.,
where 61 rub. — NKD, calculated from the moment of monetary issue of the bond until the end of 2003;
40 rub. — NKD paid to the seller in the purchase price of the bond.
When forming tax base for the first quarter of 2004, the amount of non-operating profit in the form of interest on the bond was calculated as follows. First, the accountant of the Beta organization determined the amount of income tax for the period from the date of issue of bond securities (November 1, 2003) to the end of the first quarter of 2004 (152 days). It amounted to 152 rubles. This amount was reduced by the amount of coupon income included in non-operating income at the end of 2003 (21 rubles) and by the amount of the income tax paid when purchasing the bond (40 rubles).
Thus, the amount of non-operating benefit in the form of interest on the bond for the first quarter of 2004 was:
152 rub. - 21 rub. - 40 rub. = 91 rub.
If in the current reporting (tax) period the issuer made interest payments (coupon redemption), then the taxpayer, when forming tax base for a given period, takes into account as income interest calculated and accounted for such payments (repayments), as well as the amount of income tax accrued at the end of the reporting (tax) period.
Income received when the issuer pays interest (coupon redemption) is accounted for as follows. At the first payment of interest (coupon redemption) in the reporting (tax) period, profit in the form of interest is calculated as difference between the amount of interest paid (redeemed coupon) and the amount of income tax calculated at the end of the previous tax period. For subsequent interest payments (coupon redemptions) in the reporting (tax) period, the profit is recognized as equal to the amount of interest paid (coupon redemption).
Let's change the conditions of example 1. Let's assume that the frequency of coupon payments on the bond of the issuer "Alpha" is three months. That is, the issuer pays the bond coupon on February 1, May 1, August 1 and November 1, 2004.
In this case, the duration of the first coupon period is 92 days (from November 1, 2003, the bond issue date, to February 1, 2004, the first coupon redemption date). This means that the amount of NKD paid on February 1, 2004 by the issuer of the Beta company (bond holder) is equal to 92 rubles. (1 rub. per day).
When forming the tax base for the first quarter of 2004, the Beta organization (bond owner) will calculate the amount of non-operating income in the form of interest on the bond as follows:
92 rub. - 21 rub. - 40 rub. + 60 rub. = 91 rub.,
21 rub. — the amount of coupon income included in non-operating income as of December 31, 2003;
40 rub. — NKD paid to the seller in the purchase price of the bond;
60 rub. — NKD for the period from the date of redemption of the first coupon (February 1, 2004) to the end of the first quarter of 2004 (60 days).
As we can see, the amount of non-operating profit in the form of coupon income on the bond for the first quarter of 2004 is the same amount in both the first and second examples. That is, the mere fact of repaying a bond coupon during the reporting (tax) period does not lead to a change in the amount of non-operating benefit for the given period for the bond owner.
If bonds were purchased by a taxpayer in the current tax period, then profit in the form of interest is calculated according to the same rules. But instead of the amount of income tax calculated at the end of the previous tax period, the amount of income tax paid by the taxpayer is taken into account to the seller security in price concessions.
On October 11, 2004, the Gamma company acquired a corporate debt security (bond) of the Delta issuer for 1,071 rubles, including NKD - 71 rubles. The bond issue date is August 1, 2004, maturity date is August 1, 2005. Coupon under the terms of the securities issue—RUB 365. per year (that is, 1 rub. per day). The coupon is paid by the issuer once every three months - November 1, 2004, February 1, May 1 and August 1, 2005.
When forming the tax base for 2004, Gamma calculated the amount of non-operating profit in the form of interest on the bond as follows.
First, the profit was calculated for the period from the moment the bond was purchased (October 11, 2004) to the date of payment of the first coupon (November 1, 2004):
92 rub. - 71 rub. = 21 rub.,
where 92 rub. - this is the amount of the first coupon due on the bond for the period from the date of its issue (August 1, 2004) to the date of payment of the first coupon (November 1, 2004), that is, for 92 days;
71 rub. - this is the amount of NKD paid to the seller when purchasing a security on October 11, 2004.
Then the amount of income tax attributable to the bond from the date of payment of the first coupon to the end of the tax period was determined. It is equal to 61 rubles. (1 ruble per 61 days - from November 1 to December 31, 2004).
Hence, total amount The coupon yield on the issuer's bond "Delta" for 2004 is:
61 rub. + 21 rub. = 82 rub.
If during the reporting (tax) period there was a disposal (sale, redemption) of bonds, then profit in the form of interest is calculated according to the same rules. But the amount of income tax calculated at the end of the reporting (tax) period is replaced when calculating interest profit by the amount of income tax calculated on the date of disposal of the bond.
On April 5, 2004, the Well organization acquired the bond of the Omega issuer at a price of 1,035 rubles, including NKD - 35 rubles. The nominal value of the bond is 1000 rubles. The date of its monetary issue is March 1, 2004, the maturity date is April 5, 2005. Coupon under the terms of the securities issue—RUB 365. per year (that is, 1 rub. per day). The coupon is paid by the issuer once every three months - June 1, September 1, December 1, 2004 and April 1, 2005.
The first coupon on the bond was received by the Well organization in the amount of 92 rubles. (for 92 days that passed from the date of issue of the bond - March 1 to the date of accrual of the first coupon - June 1, 2004).
Income from this operation was taken into account when calculating tax for the first half of 2004.
The amount of interest benefit on the bond for the six months was calculated as follows:
30 rub. + (92 rub. - 35 rub.) = 87 rub.,
where 30 rub. — the amount of the income tax calculated from the date of payment of the first coupon (June 1, 2004) until the end of the reporting period (June 30, 2004), that is, for 30 days;
92 rub. - the amount of the first coupon due to the taxpayer for the period from the date of the bond issue (March 1, 2004) to the date of payment of the first coupon (June 1, 2004), that is, for 92 days;
The bond was sold on July 16, 2004 for 1,045 rubles, including NKD in the amount of 45 rubles accrued from the date of payment of the first coupon (June 1, 2004) until the date of sale, that is, 45 days.
When forming the tax base for income tax for 9 months of 2004, the amount of interest (coupon) profit on the bond was calculated as follows:
45 rub. + (92 rub. - 35 rub.) = 102 rub.
General procedure for reflecting coupon income in the tax return. When filling out an income tax return2, the interest (coupon) profit received by the taxpayer on bonds is reflected in non-operating income.
First, we will analyze the situation when the taxpayer, the owner of the bonds, did not sell these securities during the reporting (tax) period and did not present them for redemption to the issuer.
In the declaration for reporting period the amount of coupon income on corporate bonds calculated as of the last day of the reporting period is reflected on line 030 of sheet 02 along with other non-operating benefits of the company.
When filling out a declaration for the tax period, the taxpayer must provide a breakdown of the composition of non-operating income in Appendix No. 6 to sheet 02 of the declaration. Interest received by the taxpayer on corporate bonds is reflected on line 030 of this application. Then the total amount of non-operating income is calculated (line 010 of Appendix No. 6 to sheet 02), which the taxpayer transfers to line 030 of sheet 02 of the declaration.
Let's use the conditions of example 3 and see how in annual declaration The income tax reflects the interest (coupon) profit on unsold (outstanding) bonds.
Let us recall that the amount of interest profit for the period from the date of purchase of the bond (October 11, 2004) to the date of payment of the first coupon (November 1, 2004) is 21 rubles, and the amount of the income tax attributable to the bond from the date of payment of the first coupon to the end of the tax period , — 61 rub. Thus, the total amount of interest benefit on this bond for 2004 is equal to 82 rubles.
Accounting for accumulative coupon income on government securities.
As a result of innovation, the state's obligations under GKOs - OFZs were provided to their owners, in particular, state bonds with a fixed coupon income ( OFZ- FD) with maturities of 4 and 5 years.
Coupon income by data bonds are accrued starting from August 19, 1998. The amount of coupon income is 30% per annum in the first year, 25 in the second, 20 in the third, 15 in the fourth, then 10% per annum (clauses 2, 3 of the Main Conditions implementation innovations for government short-term zero-coupon bonds and federal loan bonds with constant and variable coupon income with maturities until December 31, 1999 and issued before the Statement of the Government of Russia and the Bank of Russia dated August 17, 1998, approved by the Order of the Government of the Russian Federation dated December 12, 1998 N 1787-r (as amended as of 03/03/1999) "About innovations on government securities").
In addition, government savings loan bonds (OGSS) and domestic currency loan bonds (OVVZ) continue to circulate on the market, for which the right to receive coupon income is established by the conditions of their securities issue (clause 4 of the General Conditions for the Issue and Circulation of State Savings Loan Bonds, approved by Decree of the Government of Russia dated 10.08.1995 N 812, clause 2 of the Conditions for the issue of domestic government currency bond loans, approved by Decree of the Government of Russia dated 15.03.1993 N 222.
In this regard, it seems relevant to consider the procedure for reflecting accumulated coupon income in the accounting records of organizations.
Coupon income is a form of profit on bonds as a type of securities in the form of a predetermined (fixed) or “floating” (variable) interest accrued to their nominal value after a certain period in accordance with the terms of the securities issue. If specified period shorter than the bond's circulation period (i.e., the profit is accrued more than once - simultaneously with the redemption of the bond), then the right to receive it is fixed by a cut-off coupon usually included in the bond form (in its documentary form), traditionally called a "coupon" (from the French coupon - balance, coupon, receipt). Therefore, such profit is called coupon profit. Accordingly, the accumulated coupon income (ACI) is “part of the coupon income in the form of a percentage of the nominal value of the bond, calculated in proportion to the number of days that have passed from the date of issue of the bonds or the date of payment of the previous coupon income, and included in the price of the agreement” (clause 2 of the Letter of Min. fina Russian Federation and the State Tax Service of the Russian Federation dated June 13, 1995 N 53 “On some issues related to the taxation of bonds with variable coupon income”).
Thus, the purchased state bonds with coupon income consists of two parts - the principal value and the value of the coupon income accumulated on the day of purchase. And as long as the rate tax for state income bonds will differ from the general income tax rate, income tax will need to be taken into account separately from the principal value of the bond
Currently, experts have proposed four ways to reflect accrued income in accounting - according to account 31 “deferred expenses”, 58 (06) “Short-term (long-term) financial investments", 76 "Settlements with other debtors and borrowers" and 83 "deferred income". Let's consider which of them is more consistent with the economic nature of both the income tax paid (when purchasing a bond) and the income income received (when paying it off or selling a bond).
If the received accrual income is a non-operating profit, which is manifested when it is paid on time without any movement of the bond itself, then the nature of the accrual paid is ambiguous:
on the one hand, this is part of the investor’s actual costs, and as such, the income tax paid should be taken into account as a debit in the securities accounts;
on the other hand, the investor’s non-operating costs associated with future profit, which provides the basis for accounting for the income tax paid on debit accounts 31 “deferred expenses” or 83 “deferred income”;
on the third side, it is a debt ( states or a future buyer), which will definitely be repaid, which allows you to take into account the income tax paid on debit account 76 "Settlements with other debtors and borrowers".
We believe there is no clear solution.
In our opinion, an accounting method is preferable that allows us to take into account the first and second properties of the accrued income tax paid (accountable accrual as part of actual expenses on acquisition and as a non-operating cost), each of which, from our point of view, is in all respects more significant than the third (NKD as accounts receivable), i.e. reflection of the income tax paid:
when purchasing a bond - on the subaccount of account 06 "Short-term financial attachments"(for OVVZ new OFZ - FDs acquired with the intention of receiving a profit on them for more than a year) or 58 "Short-term financial attachments" (in all other cases);
at sale(redemption) of a bond or payment of income tax - in correspondence directly with the debit of account 80 “profit and loss” without using sales accounts
Sources
Wikipedia.org - free encyclopedia
Yandex. Dictionaries.
Academic. ru - dictionaries and encyclopedias
Mirslovarei.com - collection of dictionaries and encyclopedias
Rnk.ru - Russian tax courier
Top-audit.ru - auditing and consulting group (ACG) "RSM Top-Audit"
Investor Encyclopedia. 2013 .
coupon income- Income from coupons of bonds and other coupon securities for a certain period (“coupon period”). Topics: economics EN coupon yield… Technical Translator's Guide
COUPON INCOME- (coupon yield) See: coupon. Business. Dictionary. M.: INFRA M, Ves Mir Publishing House. Graham Betts, Barry Brindley, S. Williams and others. General editor: Ph.D. Osadchaya I.M.. 1998 ... Dictionary of business terms
Accumulated Coupon Income- See accumulated coupon income Dictionary of business terms. Akademik.ru. 2001... Dictionary of business terms
Interest (coupon) income- 2.6. Interest (coupon) income is income in the form of interest accrued to the face value of bonds...
The most reliable investment in the securities market. This instrument is recommended for those who value complete safety of capital with an income slightly higher than on a bank deposit.
The bondholder receives a fixed income from his investment in the form of interest payments. In addition, in many cases, bonds are sold at a price below par (at a discount), and they are repaid by the borrower at par. The difference between the purchase price and the face value is also the investor's income.
This tool is very similar to Bank deposit- money is invested in it for a certain period at a predetermined percentage. But bonds have two main advantages: usually higher yields on corporate bond issues and the ability to withdraw money without losing accrued interest. If at early closure If you have a fixed-term bank account, interest is lost, then investments in bonds are completely liquid - they can always be sold without losing the interest due for each day the bond is held.
The bond market is a market for conservative investors (unlike the stock market). Price fluctuations in this market are incomparably small compared to the active dynamics of stock quotes. For investors, the main thing is interest (coupon payments), although the change market value bonds also affect profitability. Corporate bonds are more reliable than stocks and more profitable than bank deposits.
The yield on corporate bonds ranges from 8 to 18%, depending on the reliability of the bond issuer. There is a wide variety of bond issues on the market, from which an investor can choose the best combination of return and risk. There are reliable bonds, large companies with small coupon payments, there are also “junk” bonds of small enterprises with high interest payments. The yield on bonds of new small issuers that are bringing their securities to the market for the first time is especially high.
Government bonds of the Russian Federation (OFZ) are not of interest to the mass investor due to their low yield (about 8% per annum).
A bond is a debt security. By purchasing a bond of the issuing company, the investor becomes its creditor. The issuer undertakes to pay the bondholder at the end of its circulation period the par value of the bond and a known or easily predictable stable income in the form of interest on the par value.
Bonds are issued by companies in a variety of industries, as well as banks. In 2004, more than 80 companies and banks issued their bonds. Among them were both high-quality and less reliable issuers.
Bonds can be sold at any day or wait until the issuer matures the bond (bond term is 3-5 years). The accumulated coupon income and the face value of the bonds are transferred to the investor's account opened with the broker.
The main trading in bonds is conducted in the Section stock market MICEX. You can buy bonds in the same way as stocks - via the Internet. All basic exchange data for each bond issue are broadcast to trading participants and are available through trading terminals. However, to buy bonds, it is not necessary to install a trading terminal and make transactions with bonds via the Internet. A broker can buy bonds for you if you give an order over the phone.
Key bond valuation indicators
Bonds are generally considered safer investment instrument than shares because their owners have priority in claiming a share of the company's assets in the event of its liquidation or restructuring. For issuers, bonds provide a reliable alternative to banks and other lenders, which may offer less attractive financial terms than capital markets, such as higher interest rates on borrowing.
When investing in bonds, you need to pay attention to a number of key indicators, including maturity, call conditions, credit quality, interest rates, price, yield and tax status. Taken together, these factors allow an investor to assess the fair value of a particular debt obligation and decide to what extent this type investment is consistent with its investment objectives.
Maturity. Maturity refers to a predetermined date in the future by which the face value of a bond must be returned to the investor. Bond maturities typically range from one year to 30 years. Maturity ranges are classified as follows:
- Short-term: – up to 5 years;
- Medium-term: – from 5 to 12 years;
- Long-term: – from 12 years and above.
Some bonds have redemption provisions (call provisions), which allow the issuer (or oblige him) to buy them back from investors before maturity, on a predetermined date, and pay their face value. Bond issuers sell bonds with a right of early redemption, or callables, to provide themselves with relative freedom of action while retaining the right to redeem the bonds before maturity after a predetermined date. This right is essential for bond issuers in the context of falling interest rates, since it allows them to withdraw existing debentures, issue new ones - for the same amount, but at a lower interest rate.
When a bond is called, investors are given the face amount of the debt back in cash and are then given the much less attractive option of reinvesting in higher-cost, lower-yielding instruments. This risk is called reinvestment risk. Investors wishing to avoid given risk, can purchase irrevocable bonds (bullets) with a fixed maturity date, made at a time, for which there is no possibility of early withdrawal from circulation. The yield of this type of paper, as a rule, is lower than that of callable bonds, but the issuer cannot force bondholders to repay them before deadline, regardless of changes in interest rate levels.
There are so-called put bonds, which, on the contrary, give the investor the right to demand that the issuer repurchase its securities on a certain date before maturity. Investors typically use this option when they need cash or when interest rates rise significantly from the level they were at when the bonds were issued. In this case, bondholders can reinvest the money received in securities with a higher interest rate.
Before purchasing bonds, an investor should determine whether the terms of sale include a call clause and, if so, ensure that he or she will receive the return calculated on the first possible call date, not just the return on the maturity date. Bonds sold with a call clause generally provide higher annual yields to offset the risk of early withdrawal.
Interest rates. Bonds provide investors with interest income, which may be fixed, variable, or payable at maturity. Most debt obligations have an interest rate that remains the same until maturity and is calculated as a percentage of the face value of the security (fixed rate). Typically, bondholders receive interest payments semi-annually. For example, the owner of a $1,000 bond with an 8% interest rate will receive $80 per year - $40 every 6 months. When the bond matures, the investor will receive an amount equal to its face value, $1,000.
Some investors prefer securities whose interest rates can be adjusted and are more reflective of current market rates. There are bonds with a so-called “floating” rate, which is periodically adjusted to changes in benchmark interest rates, such as rates on Treasury bills.
In addition, there are securities, so-called “zero-coupon bonds”, which, unlike ordinary bonds, do not require regular interest payments. Instead, these bonds are sold at a significant discount to par.
There are 3 main types of zero-coupon bonds traded in the U.S. bond market: zero-coupon Treasury bonds, zero-coupon corporate bonds, and zero-coupon municipal bonds. Zero coupon Treasury bonds are generally considered the least risky of the three types of securities because they are fully guaranteed federal government. Zero coupon corporate bonds offer potentially more high level profitability, designed to compensate for additional risk, the scale of which varies depending on the specific issuer.
Credit quality. Bonds can be of varying credit quality, from Treasuries that are fully guaranteed by the U.S. government to bonds rated below investment grade that are considered speculative. When issuing bonds, the issuer is obliged to provide detailed information about your financial situation and solvency. This information is contained in the prospectus, but it is difficult to conclude from it whether the company or government agency able to make regular interest payments 5, 10, 20 or 30 years after issue. Rating agencies come to the rescue by assigning a credit rating to many bonds at the time of issue and then tracking them during their “ life cycle" Brokerage firms and banks also have staff of analysts who monitor the ability (and willingness) of various companies and other issuers to pay interest and, upon maturity, repurchase securities at par.
The leading rating agencies are Moody's Investors Service, Standard & Poor's Corporation and Fitch. Each agency assigns ratings to bonds according to its own system, based on an in-depth analysis of the issuer’s financial position, quality of management, economic factors and specific sources of income that guarantee payments on bonds. The highest ratings are “AAA” (S&P and Fitch) and Aaa (Moody's). Bonds rated “BBB” or higher are considered investment grade bonds; bonds rated “BB” or lower are considered high yield bonds, or bonds below While experience has shown that a diversified portfolio of high-yield bonds carries very little risk of default over the long term, it is extremely important to recognize that for any bond taken individually, the high yield that typically accompanies a low rating is a red flag warning about higher risk.
Typically, agencies signal that they are considering changing a bond's rating by placing it on a watch list: CreditWatch (S&P), Under Review (Moody's), or Rating Watch (Fitch).
Bond insurance. Credit quality can be improved by insuring the bond. Specialized Insurance companies Servicing the fixed income market, they guarantee investors timely payment of principal and interest on the bonds they insure. In the US, the largest bond insurance firms are MBIA, AMBAC, FGIC and FSA. Most of these companies have at least, one credit rating out of three “A”, assigned rating agency on a national scale. The insured bonds, in turn, receive the same rating based on the insurer's capital and resources available to pay claims. Historically, such activity has been concentrated in the municipal bond industry, but bond insurers also provide guarantees on mortgage-backed and asset-backed obligations and are gradually expanding into markets for other types of securities.
Tax status. Some types of bonds provide investors tax advantages. Thus, interest paid on US Treasury bonds is not subject to state and local taxes; interest on most municipal obligations is deductible federal tax, and in many cases also to local income tax. An investor will generally prefer to receive taxable income or, conversely, income on which no taxes are levied, depending on the level of the tax bracket to which his income belongs, as well as the difference between the income from taxable and tax-exempt bonds (not only currently , but also for the entire period before the maturity date). The decision to invest in taxable or tax-exempt bonds also depends on whether the investor holds the securities in a tax-deferred or tax-deferred account. tax benefits(such as retirement accounts, 40l(k) accounts or IRAs).
Price. The bond price is based on large quantities variables including interest rates, supply and demand, credit quality, maturity and tax status. Newly issued bonds typically sell at or near par value. The prices of bonds traded on the secondary market fluctuate in response to changes in interest rates. If the price of a bond exceeds its face value, the bond is said to be selling at a premium; if the price is below par value, the bond is said to be selling at a discount. Treasury bonds, the primary placement of which is carried out through auction trading, are sold at a discount to par value, and they are redeemed at par value.
Nominal income. Nominal yield is a fixed income determined by the interest rate set for a given bond upon issue. It is also called the coupon rate. If a bond has a price of $1,000 and the coupon rate is 10%, then the investor will receive interest of $100 per year, which will be paid semi-annually at $50.
Profitability. When investing in bonds, it is important to remember that investment returns come with risk. The riskier a bond is, the higher its yield tends to be because it is designed to reward the investor for taking on the risk.
Current yield is calculated by dividing the annual coupon yield by the bond's current market price. For example, if the current price is $1,000 and the coupon rate is 8% ($80 per year), the current yield is 8% ($80 divided by $1,000 and multiplied by 100%). If the bond is trading at $900, and the coupon rate is also 8% ($80 per year), then the current yield is already 8.89% ($80 divided by $900 and multiplied by 100%). The current yield on discount securities is calculated by dividing the discount by the difference between the par value and the discount.
Yield to maturity or yield to early repayment(yield to call) are considered more important indicators than current yield, and make it possible to compare bonds with different maturities and coupons. The difference in the yields of two bonds is usually called the yield spread. Essentially, the yield to maturity is the discount rate at which the bond's future earnings will be equivalent to the current price.
When calculating the yield to maturity, the sum of all interest payments received by the investor from the moment of purchasing the security until the maturity date is taken into account, as well as the discount (if the bond is purchased below par) or premium (in the case of purchase above par). The bond's yield to maturity gives an idea of the real value of the securities for investment portfolio and therefore is one of the most important indicators that must be taken into account when deciding to purchase bonds.