Contents of the terms of the bond contract
(1) scalability;
(2) Convertible terms;
(3) liquidity;
(4) tax treatment;
(5) Redeemable terms.
(6) Default risk.
(7) Expiration time
(8) coupon rate
The main characteristics of bonds
1, duration
A bond is a security with an agreed term. Bonds represent the relationship between creditor's rights and debts, and there should be a clear date for repayment of principal and interest. When the bond expires, the debtor will repay the principal.
2. Asset liquidity
Liquidity means that bonds can be transferred and circulated in the securities market. Bonds are liquid, and bondholders can sell them in the securities market at any time when they need cash, or use bonds as collateral to get mortgage loans from banks. The liquidity of bonds is generally second only to savings deposits.
3. profitability
Profitability means that bondholders can get fixed bond interest from bond issuers on a regular basis. The interest rate of bonds is usually higher than that of deposits. The yield of bonds is not completely equal to the coupon rate of bonds, but mainly depends on the buying and selling price of bonds.
4. Safety
The security of bonds is manifested in the unconditional recovery of principal by bondholders at maturity. All kinds of bonds must have certain repayment conditions when they are issued, and only when certain repayment conditions are met will someone buy them. In order to protect the interests of investors, bond issuers must undergo strict examination. Only fund-raisers with high reputation are approved to issue bonds, and most bonds issued by companies need guarantees. When the issuing company goes bankrupt or liquidates, it shall give priority to repaying the bondholders' bonds. Therefore, the security of bonds is still guaranteed, which is much less risky than other securities investment.
The security of bonds refers to the ability of bonds to resist price decline in the market, generally referring to their ability not to fall below the issue price. When bonds are issued, they all promise to repay the principal and interest at maturity, so the security is generally high. Although some bonds are illiquid, they are safe because they can be sold in cash or without loss after a long time. Even so, bonds may suffer from default risk and market risk. The former risk refers to the risk that the bond issuer cannot pay the interest or repay the principal in full and on time, which mainly depends on the credit status of the issuer. Generally speaking, the government has the highest credit rating, followed by financial companies and enterprises. Market risk means that the market price of bonds decreases with the increase of capital market interest rate, because the price of bonds moves in the opposite direction to the market interest rate. When the interest rate falls, the market price of bonds rises; When interest rates rise, the market price of bonds falls. The farther a bond is from its maturity date, the greater the impact of interest rate changes on its price.
5. Autonomy
Bonds are independent, and the funds raised by enterprises through issuing bonds are loans from the public. Bond holders only have creditor's rights to the issuing enterprises and cannot participate in the company's operation and management like stocks. In addition, the funds raised by enterprises through issuing bonds can be freely used according to the needs of their own production and operation, unlike bank loans, which have designated purposes, and the use of their funds is regulated by banks.
Bond trading mode
1. Spot trading refers to a trading method in which both parties make delivery immediately or in a very short time after trading.
2. Credit trading, also known as margin trading or early trading, refers to a trading method in which traders rely on their own reputation to buy and sell bonds by paying a certain amount of margin to gain the trust of brokers.
3. Repurchase transaction refers to selling (or buying) bonds, and at the same time agreeing to repurchase (or sell) bonds at a specified price after a certain period of time. In fact, it is a bond sale with repurchase (or sale) conditions.
4. Futures trading refers to the trading mode in which both parties agree to make delivery at a certain time in the future according to the conditions agreed at the time of trading.
5. Option trading. Option refers to the right of option holders to buy or sell financial assets of certain specifications at the price agreed by both parties within a specified time.
Bond contract terms:
1.3 model bond subscription agreement
2.3 Model bond listing agreement
3. How to restrain overseas bond issuers?
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