Fixed Income Products
At Core Pacific-Yamaichi we provide our clients with a wide range of bond trading services. We mainly offer bonds issued primarily by governments or major enterprises from Asia (mainly trading in USD). We also provide debt instruments in other currencies to match the different investment objectives of our clients.
Introduction of Bonds
A bond is a form of loan: the holder of the bond being the lender (creditor) while the issuer of the bond being the borrower (debtor). The borrower guarantees to pay a fixed interest within the specified time and repay the loan on the due date to the lender.
The worldwide Bond market is huge and provides an investment channel for investors. Bonds can be issued by governments, credit institutions, companies, or supranational institutions in the primary markets. The duration of bonds ranges from 1 to 30 years. You can hold bonds until maturity or sell at market prices prior to maturity. Investors should select bonds most suitable to them based on their own risk level, the respective yield, and the duration of the bond.
The worldwide Bond market is huge and provides an investment channel for investors. Bonds can be issued by governments, credit institutions, companies, or supranational institutions in the primary markets. The duration of bonds ranges from 1 to 30 years. You can hold bonds until maturity or sell at market prices prior to maturity. Investors should select bonds most suitable to them based on their own risk level, the respective yield, and the duration of the bond.
Terms of Bond
Principal: The Face Value of Bond. It is the amount paid back to the bondholders by the issuer on the maturity day.
Coupon Rate: This is the annual rate the issuer pays the bondholders, e.g. annually, semi-annually, quarterly.
Maturity Date: This is the date the issuer paid back the principal to the bondholders. Perpetual Bonds do not have a fixed maturity date.
Guarantor: Guarantors provide extra credit guarantee for the bond. If the bond defaults, the guarantor agrees to repay the principal and interest to the bondholder.
Payment Rank: It is the priority of the claim of bondholders in the event of the issuer's liquidation. Senior bondholders will have a higher priority of claims over the subordinated bondholders.
Coupon Rate: This is the annual rate the issuer pays the bondholders, e.g. annually, semi-annually, quarterly.
Maturity Date: This is the date the issuer paid back the principal to the bondholders. Perpetual Bonds do not have a fixed maturity date.
Guarantor: Guarantors provide extra credit guarantee for the bond. If the bond defaults, the guarantor agrees to repay the principal and interest to the bondholder.
Payment Rank: It is the priority of the claim of bondholders in the event of the issuer's liquidation. Senior bondholders will have a higher priority of claims over the subordinated bondholders.
Type of Bonds
Fixed Rate Bonds: These are bonds with the interest rate fixed throughout the entire investment period. The interest rate does not change with the market interest rate.
Callable Bonds: The issuer has the right to redeem the bond at the predetermined redemption price prior to the maturity date. For example, the duration of a bond is for a period of five years. The issuer reserves the right to early redemption after 2 years. When the market interest rates drop, the issuer may exercise the right to redeem the bond to reduce financial costs. But, it is not a legal obligation for the issuer to redeem. When the market interest rate rises, the issuer may not exercise the right to redeem the bond until maturity. Putable Bonds: The bondholders have the right to sell back the bond at the predetermined price prior to the maturity date. For example, the duration of a bond is 5 years, bondholders can sell the bond back to the issuer at the predetermined price of 100% at year 2. Bondholders should be aware if the issuer has enough financial ability to buy back the bond.
Floating Rate Bonds: The interest rate is reset periodically with the predetermined benchmark. Floating Rate bond is linked with interbank interest rates with a spread. In general, the interest rate of the bond will be higher than the interbank rates. Therefore, the interest rate will be floating as an interbank rate in order to increase the attractiveness of bonds.
Zero Coupon Bonds: These are bonds that do not pay interest to holders on a regular basis. Holders will generally purchase the bond at a larger discount than the face value bond at the beginning and collect the principal upon maturity.
Convertible Bond: Bondholders have the right to convert the bond to the unissued shares of the issuer.
Exchangeable Bond: Bondholders have the right to exchange the bond with the issued shares of the issuer.
Contingent Convertible Bond: On the occurrence of a specific trigger event, these types of bonds may be written off completely or partially, loss adsorption and converted to common stocks.
Callable Bonds: The issuer has the right to redeem the bond at the predetermined redemption price prior to the maturity date. For example, the duration of a bond is for a period of five years. The issuer reserves the right to early redemption after 2 years. When the market interest rates drop, the issuer may exercise the right to redeem the bond to reduce financial costs. But, it is not a legal obligation for the issuer to redeem. When the market interest rate rises, the issuer may not exercise the right to redeem the bond until maturity. Putable Bonds: The bondholders have the right to sell back the bond at the predetermined price prior to the maturity date. For example, the duration of a bond is 5 years, bondholders can sell the bond back to the issuer at the predetermined price of 100% at year 2. Bondholders should be aware if the issuer has enough financial ability to buy back the bond.
Floating Rate Bonds: The interest rate is reset periodically with the predetermined benchmark. Floating Rate bond is linked with interbank interest rates with a spread. In general, the interest rate of the bond will be higher than the interbank rates. Therefore, the interest rate will be floating as an interbank rate in order to increase the attractiveness of bonds.
Zero Coupon Bonds: These are bonds that do not pay interest to holders on a regular basis. Holders will generally purchase the bond at a larger discount than the face value bond at the beginning and collect the principal upon maturity.
Convertible Bond: Bondholders have the right to convert the bond to the unissued shares of the issuer.
Exchangeable Bond: Bondholders have the right to exchange the bond with the issued shares of the issuer.
Contingent Convertible Bond: On the occurrence of a specific trigger event, these types of bonds may be written off completely or partially, loss adsorption and converted to common stocks.
Credit Rating
International rating agencies such as Moody's and Standard & Poor's provide financial information on bond issuers in the form of ratings as guidance to investors. AAA / Aaa is the highest rating; Caa3 / CCC- is the lowest. The higher the rating is, the lower the risk and the corresponding return. Generally speaking, 'A' denotes a good rating. Bonds with ratings above BBB or Baa are known as “High-Grade Bonds/Investment Grade Bonds” while bonds with ratings below that are known as “High Yield Bond/Junk Bond.”
Movements of Interest Rates
Fixed-rate bonds or floating-rate bonds are the most common types of bonds. Coupons might be payable periodically, typically once every 3 months, 6 months, or every year. Bond prices are mainly subject to movements in interest rates and the creditworthiness of the issuers. Generally bond prices will increase when market interest rates decrease and vice versa.
Bond Yields
Yield-to-Maturity: The annualized rate of return of bondholders for holding the bonds until the maturity date.
Yield-to-Call: The annualized rate of return of bondholders holding the bonds until the predetermined early redemption date.
Yield-to-Put: The annualized rate of return of bondholders holding the bonds until the predetermined putable date.
Yield-to-Call: The annualized rate of return of bondholders holding the bonds until the predetermined early redemption date.
Yield-to-Put: The annualized rate of return of bondholders holding the bonds until the predetermined putable date.
Special Provisions
Investors should also notice that different types of bonds might have different terms and conditions.
Callable: It grants the right for the issuer to redeem the bond at the predetermined price prior to the maturity date. The issuer may not fully redeem the bonds but part of the amount issued.
Putable: It grants the right for the bondholders to sell back the bond to the issuer at the predetermined price.
Callable: It grants the right for the issuer to redeem the bond at the predetermined price prior to the maturity date. The issuer may not fully redeem the bonds but part of the amount issued.
Putable: It grants the right for the bondholders to sell back the bond to the issuer at the predetermined price.
Why invest in Bonds?
Bond investors could acquire a stable income at a fixed interest rate. Also, bond investors generally enjoy a higher interest rate than investing in time deposits.
Features of Bond trading services at Core Pacific-Yamaichi
A team of experienced professionals is at your disposal at Core Pacific-Yamaichi, providing our retail and institutional clients, with extensive market information and a comprehensive bond trading network. To meet the needs of our clients, we offer a convenient and reliable one-stop service to our clients. Clients can deposit their bonds into the custodian account of Core Pacific-Yamaichi at Euroclear (an international bonds central settlement center).
For fee detial please refer to Service Charges.
For fee detial please refer to Service Charges.
Important Notice:
The information is provided by Core Pacific – Yamaichi International (H.K.) Limited (“CPY”) and is solely for your reference. It is not and shall not be construed as an offer, recommendation or solicitation to buy or sell any investment products, nor is it an official confirmation of terms. Investors should consider and understand their financial positions, investment experience and risk tolerance level before trading. If you have any doubt, please consult your investment advisor and/or other appropriate professional for advice.
The content provided herein in this website is based on information generally available to the public from sources believed to be reliable and true, but no representation is made as to its accuracy or completeness or that any returns indicated will be achieved. CPY expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the content. Please be noted that some assumptions may be used in relation to any other information provided herein. Changes to assumptions may have a material impact on returns details. Information, prices and availability are subject to change without notice and no representation is made and no responsibility is accepted for.
For risks relating to Fixed Income Product,please refer to the Fixed Income product Important Notice and Risk Disclaimer.
