Cosa sono le obbligazioni?

Summary

The video explains the concept of bonds as a means for companies and governments to raise funds. Bonds are debt securities where investors lend money in exchange for periodic interest payments and repayment of the principal at maturity. The video also compares bonds to stocks, explaining their risk profiles. Bonds are classified as either corporate or sovereign, with different levels of risk and returns. The secondary market for bonds allows investors to buy and sell before maturity, affecting bond prices and yields. The video emphasizes the stability of bonds compared to stocks, especially in cases of corporate defaults.

Takeaways

• 😀 Bonds are debt instruments issued by companies or governments to raise capital.
• 😀 When you buy a bond, you lend money to the issuer, and in return, you receive interest and the promise of repayment at maturity.
• 😀 Corporate bonds are issued by companies, while government bonds are issued by states and form public debt.
• 😀 Bond interest is paid periodically (e.g., every 3, 6, or 12 months), or at maturity, depending on the bond’s structure.
• 😀 Bond interest rates (coupons) are fixed or variable and are determined at the time of issuance.
• 😀 The main risk for bondholders is default, which occurs if the issuer cannot repay the bond’s principal or interest.
• 😀 Higher-risk bonds (issued by weaker companies or governments) offer higher interest rates to attract investors.
• 😀 The 'spread' or 'differential' refers to the difference in yield between two bonds with similar risk profiles, often compared to a benchmark like German Bunds.
• 😀 Bond prices fluctuate in the secondary market based on changes in the issuer's risk level or broader market conditions.
• 😀 Bondholders are repaid before shareholders in the event of a company's bankruptcy, making bonds safer than stocks.
• 😀 Unlike stocks, which depend on company performance, bonds provide a fixed return based on the interest rate, unless the issuer defaults.

Q & A

What are bonds and how do they work?

Bonds are debt securities issued by companies or governments. When you buy a bond, you lend money in exchange for a promise of repayment with interest over a fixed period. The issuer repays the principal amount along with interest, typically in periodic payments, until the bond matures.

What is the main difference between bonds and stocks?

The main difference is that bonds represent debt, where investors are creditors, while stocks represent ownership in a company. Bondholders receive fixed interest payments, and in case of default, they are prioritized over shareholders in receiving repayment.

What is the risk involved with bonds?

The primary risk with bonds is the possibility of default, where the issuer fails to repay the debt. Bonds issued by less stable companies or governments carry higher risks, but offer higher interest rates as compensation.

How are bond interest rates determined?

Bond interest rates, known as coupons, are typically fixed or variable and are determined at the time of issuance. The interest paid is usually based on a percentage of the bond's face value, and it can be paid periodically or at maturity.

What happens to the price of a bond in the secondary market?

The price of a bond in the secondary market fluctuates based on supply and demand. If the issuer becomes riskier, the bond price tends to fall, increasing the yield. Conversely, if the issuer becomes more stable, the bond price may rise, reducing the yield.

What is the difference between senior and subordinate bonds?

Senior bonds are the most secure and are repaid first in case of bankruptcy. Subordinate bonds have a higher risk because they are repaid only after senior bonds, often offering higher interest rates to compensate for the increased risk.

What does it mean for a bond to go into default?

When a bond goes into default, it means the issuer is unable to meet the repayment terms, either failing to pay interest or the principal amount. This can lead to losses for bondholders.

How do bond yields and prices relate?

Bond yields and prices have an inverse relationship. When bond prices decrease, the yield increases because the fixed interest payment becomes more attractive relative to the lower price paid for the bond.

Why do companies issue bonds instead of raising funds through stocks?

Companies may prefer issuing bonds to raise capital instead of selling stocks because bonds allow them to retain ownership control while still accessing needed funds. Bonds also offer fixed repayment terms, unlike the variable returns that stocks provide.

What does 'spread' mean in finance?

In finance, 'spread' refers to the difference in yields between two similar investments with different risks. For example, it is commonly used to indicate the difference in yields between government bonds from different countries, such as Italian bonds versus German Bunds.