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! IMPORTANT. Eurobonds. Foreign exchange revaluation. NUANCE

At the present time, when the securities market is quite popularized, there is a large influx of new investors of different categories, which is used by brokers, in the person of some unscrupulous managers who are guided primarily by their own interests (selling highly marginal products, additional services, and other things to make money an extra penny in the form of a bonus) to the detriment of the interests of clients.

Today we are going to talk about a group of conservative investors who primarily strive to preserve their capital, but at the same time to get some kind of fixed profitability, and preferably covering inflation.

Consider the following case:

There is a certain Ivan Ivanov, who, over the years of work experience or for other reasons, has formed financial savings, let’s say 7,400,000 rubles (equivalent to $ 100,000 at the current exchange rate), which he plans to use for a designated purpose – let’s say the purchase of an apartment or a country house, etc. But at the moment there is no proper supply on the market, and he thinks, but how to most effectively manage the money before the actual purchase of the property, so that the DS does not lie “dead weight” but, on the contrary, bring an additional amount in the form of income from investments?

One evening, while drinking another glass of beer, he saw an advertisement from one of the popular brokers that one could get a fixed profit of more than 5% per annum by investing in EUROBONDS (debt securities denominated in foreign currency).

And so he came to the office for a meeting with a manager who, with fervent enthusiasm, tells a potential investor about how it is possible, without risking anything, to form a ready-made portfolio of Eurobonds and receive a return in $ that exceeds the current average rate on bank deposits not only in $ , but also in rubles! Only silently, that in addition to the coupon yield, there is also the price of the bond itself (expressed in% of the nominal), which can not only grow, but also fall, bonds with a long maturity (5-7-10 years or more) are especially sensitive in this regard.

And about nuances of taxation and the impact of foreign exchange revaluation also, as a rule, are silent. This is what I want to emphasize in this post and bring next example:

For example, the considered image of a mass investor who does not have knowledge of financial markets, represented by Ivan Ivanov, decided to invest in Eurobonds, and as an argument, the manager of a brokerage company / bank gave a rather popular answer: “In the event of a possible crisis, you will not only save your capital, but you will also earn through the growth of $ + coupon income in $ on bonds „

Indeed, during a crisis, as a rule, the dollar rises to the ruble, but the cost of debt securities falls, especially if the issuer’s credit rating leaves much to be desired, and the duration is not so close (in ready-made portfolios, it is mainly long issues for which a higher coupon yield).

Now let’s count on the numbers:

– bought a portfolio of Eurobonds for $ 100,000, having previously converted rubles into $ at the rate of 74 rubles

– Suddenly, for some specific reason, the market situation changes, and bonds begin to decline (yield growth). In the graph on the right, he gave as an example the dynamics of an exchange-traded ETF, which is focused and reflects the change in the value of a basket of US government bonds adjusted for coupon payments, with a maturity of 3-7 years (as you can see in history, there was a period of two years when decreased in price by 7.6% in total)

– The investor, observing that from the initial $ 100,000, he at the moment has $ 92,400, decides to take the money without waiting for the debt securities to be paid off, giving an order to sell the securities at the market price

– But here another one awaits him surprise, in the form of a requirement to pay personal income tax! It would seem from where?

And everything is very simple, the USDRUB rate at the time of purchase was 74 rubles (7,400,000 rubles were spent on the purchase of the Central Bank), and at the time of sale, assume 86 rubles (92,400 * 86 = 7,946,400 rubles). Bingo, be so kind to pay another 71,032 rubles (13% * (7,946,400 – 7,400,000)) tax from a loss-making operation)))

In total, we get that simply by stupidly buying dollars for rubles, the investor would have earned on the exchange rate difference, would not have lost on the decrease in the cost of Eurobonds, would not have paid personal income tax and would have saved on expenses in the form of commissions to the broker. But they don’t talk about this, it is not profitable for the exchange industry))

8,600,000 rubles instead of 7,875,000 rubles, the difference of 725,000 rubles due to financial illiteracy !!!

So when it makes sense to consider buying bonds? When the rate increase cycle ends, a certain stage of $ growth has been passed, then it becomes possible to buy securities at a discount, with a more attractive coupon yield and subsequently earn much more on the recovery of quotations. And now we are in a directly opposite situation, when the cycle of low rates is just ending …

The fable of this “song” isthat before investing / placing money somewhere, find out as much information as possible, create a whole list of questions (“what if?”) and try to get clear and detailed answers to them.


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