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Tutorial: Senior bonds

What are senior bonds?

Senior bonds are collecting bonds with the nominal value of CZK 10,000 and determined interest yield (coupon). They are intended for clients who want to get the determined interest yield for a predetermined period. The payout of interest yield and nominal value is guaranteed by their issuer.

How do senior bonds work?

The interest yield is usually paid once a year on determined dates. On the maturity date, the bond nominal value is paid out together with the last coupon. The price for which the bonds are bought is also important for the actual investment yield. When current yields on the bond market are lower than the bond interest yield, the bonds are sold for a higher price than their nominal value and vice versa. The current yield till maturity, calculated from the current selling price and yields that are to be paid out in the future, is therefore lower or higher than the bond interest yield.

Your benefits

Purchase of a bond will enable you to deposit money for a determined period, with a predetermined yield if you keep the bonds till their maturity date. The payout of the bond interest yield and nominal value is guaranteed by their issuer.

Your advantages

  • Thanks to a fixed maturity date, other investments can be planned.
  • The current yield till maturity together with the bond selling price is published daily in the bond price list.
  • Bonds may be bought at Česká spořitelna branches or through SERVIS 24.

You should know

  • Bond selling and purchase prices change every day due to yield changes on the bond market. If an investor keeps bonds till the maturity date, price fluctuations will not affect its final yield.
  • Bonds are offered in the form of a collecting bond - Česká spořitelna purchases and sells bonds by transfer of securities in the register of shareholders. The transfer is settled within 3 business days after ordering a trade. If an investor pays the price of a bought bond, a share in a collecting bond will be credited to the investor's asset account within 3 business days after ordering the trade.
  • Exit fee for early redemption in case of debt securities, premium bonds, subordinated and other bonds is 2% of the trade volume.
  • The yield till maturity is the yield on a bond which is held till the maturity date. It is derived from the current bond selling price and future interest yields. The yield till maturity is used to compare the yields on bonds with various maturity periods and with various coupons.
  • In the period between the yield interest (coupon) payouts, the aliquot interest yield (AÚV) will be calculated as a part of the nominal yield as allocated to the bondholder for the period from the bond issue or last coupon payout till the day that the trade is settled. AÚV is added automatically to the bond price, and can be either positive or negative.
  • Issue additions of bonds issued by Česká spořitelna are available at branches or at websites of Česká spořitelna.

Purchase conditions

  • Bonds can be bought for prices as quoted in the current bond price list.
  • To buy a bond, you need to have an asset account of investment instruments with Česká spořitelna. Opening an asset account is free of charge, it can be done at any branch of Česká spořitelna, an investor - natural person will have to submit a valid identity card, a legal person will have to submit documents of corporate personality.
  • To buy a bond, it is not necessary to have a money account at Česká spořitelna. Money for the payment of purchase may be sent to the respective collecting account from any Czech crown account
  • The fee of one instruction for bond purchase or sale is CZK 100, without regard to the number of bought or sold bonds.
  • The minimum investment is normally 3 pieces, i.e. CZK 30,000.

Who can buy?

  • Citizens of the Czech Republic or foreign nationals over the age of 18 years (legal representative in the case of a minor).
  • Legal person, natural person–entrepreneur.
  • Other entities established under the laws of the Czech Republic (foundations, movements, political parties).

How do senior bonds react to…

... increasing interest rates?
Any increase of interest rates on the market will lead to a drop in prices of already issued bonds with fixed coupons. If current interest rates are higher than the ones at the time that the bond was issued, under otherwise identical conditions, the bond will be sold for a price that is lower than its nominal value.

… stable interest rates?
Under otherwise identical conditions, stable interest rates will not affect the bond price.

… decreasing interest rates?
Any decrease of interest rates on the market will lead to an increase of prices of already issued bonds with fixed coupons. If current interest rates are lower than the ones at the time that the bond was issued, under otherwise identical conditions, the bond will be sold for a higher price than its nominal value.


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