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How do covered bonds work? Covered bonds generate interest (coupon) payments that are fixed by amount and schedule. At the end of maturity the investor receives 100% of his money back. The invested capital is secured by collateral. Given the high degree of safety, the interest rate is moderate.
How do bank debentures work? The investor buys the bank debenture at its issue price. In return, the investor receives periodical interest payments (coupons) and the redemption at the end of maturity. The coupon can be fixed or variable. At the end of maturity the bank debenture is redeemed in full, i.e. paid back, or in the case of a redemption plan, paid back in instalments.
How do subordinate bonds work? Subordinate bonds offer the investor periodical interest payments (coupons) and full redemption at the end of maturity. The interest rate tends to be one to two percentage points above that of non-subordinated bonds, which reflects the higher theoretical risk of subordinate bonds. In reality, subordinate bonds have proven very safe. The claims of holders of subordinate bonds are superior to those of shareholders, because their bond coupons have to be honoured before any share dividends can be distributed by the company.
How does a structured bond work? Maturity, repayment and interest rate (coupons) of a structured bond are defined by the individual terms of issue. The flexibility of the structure makes it possible for the bond to take advantage of current opportunities on the bond market and offer attractive yields.
How does a credit-linked note work? When the reference debtor meets its payment obligations as scheduled, the bondholder receives an attractive return as well as 100 percent of the invested nominal value. However, if there is a credit event (insolvency, default on payment or debt restructuring), the credit-linked note is prematurely repaid and instead of the nominal amount either a bond issued by the underlying debtor is delivered or the current value of a reference bond is determined and paid out. The price of the reference bond will usually be quoted far below 100 percent due to the credit event. This renders tradability of the underlying liabilities difficult and weigh further on the price.
How do German corporate bonds work? German corporate bonds are issued as fixed- or floating-rate securities. The interest (coupon) is usually paid once a year, and at the end of maturity the bond is redeemed in full. The maturities are usually within a range of three to thirty years. If the bond has already been issued in the past, the investor may buy the security at its market price which is set by supply and demand. One criterion of evaluation for a bond is the rating it gets from independent rating agencies. The lower the rating, the riskier the investment – and the higher the interest rate.
How do CEE corporate bonds work? New CEE corporate bonds are issued for subscription as fixed- or floating-rate securities. The dividend (coupon) is usually paid once a year, and at the end of maturity the bond is redeemed in full. As investor you know exactly what interest payments to expect. Maturities are mostly medium- to long-term.
How do international corporate bonds work? New international corporate bonds are issued as fixed- or floating-rate securities. The dividend (coupon) is usually paid once a year, and at the end of maturity the bond is redeemed in full. The maturities are usually within a range of three to thirty years. If the bond has already been issued in the past, the investor may buy the security at its market price which is set by supply and demand. One criterion of evaluation for a bond is the rating it gets from independent rating agencies. The lower the rating, the riskier the investment – and the higher the interest rate. If you buy international corporate bonds in foreign currencies, i.e. so-called foreign bonds, you should take the currency risk into consideration.
How do CEE government bonds work? CEE government bonds are primarily issued in the form of fixed-rate securities. Their dividend (i.e. coupon) is usually paid once a year. At the end of maturity, the bond is redeemed in full. This means that you, as investor, know exactly how much interest you can expect and when you will receive the initial investment back. If you buy government bonds in foreign currencies, i.e. so-called foreign bonds, you should take the currency risk into consideration.
How do international government bonds work? You buy an international government bond at its issue price as security with fixed or floating interest rate. The interest (coupon) is paid annually. At the end of maturity the bond is redeemed in full. Your advantage as investor: you know right from the start what amount you will receive at the end of the term. If you buy government bonds in foreign currencies, i.e. so-called foreign bonds, you should take the currency risk into consideration.


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