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Divided theories of investment modern risky bonds into two types market risk and the risk of the company, the first type is which includes factors the economy general as the level interest rate factors and different industry, which can not reduce it by diversifying bonds purchased, while the second type, which includes the risk of the company itself, the non-fulfillment of which can be reduced significantly through diversification.
In a Option Bot 2.0 study of the components of these risks for each of the bonds regular bonds with interest rates higher seen as following figure shows that the market risk which constitutes 85-90% of the total risk for bonds normal while the risk of the company constitute the largest percentage for bonds yielding higher.
It is well known that every investment tool include some degree of risk and stop the safety of the investment decision for investors to understand these risks and learn how to budget with revenue potential and this means that whenever carrying investor risk higher the expected return is higher and there are some risks that investors should be taken into account When you invest in bonds, where you must make sure that they will achieve an appropriate return for those risks, including
Inflation risk: where inflation causes the erosion of the value of the assets or income where that inflation would reduce the value of the currency.
Interest rate risk: in the case of a high interest rate in the market value of bonds fall, which distributes a fixed return.
Liquidity risk: the risk borne by the investor when investing in an investment tool that can not sell them in a timely manner and as quickly as desired.
Credit risk: the inability of the source of bonds to fulfill its obligation to bondholders on time in terms of payment of interest or coupons or Face value, out of the amount borrowed in the event of bankruptcy or achieve huge losses.
Factors that affect the international bond market
There are many factors affecting the evolution of the international bond market is the most important
Taxes: There is no doubt that the level of tax on bonds have a direct impact on the international bond market, has had a tax reduction or cancellation of a significant impact on the evolution of this market and this is what actually happened in the Eurobond market.
Distribution zones: The distribution timetable for key markets international was a key factor helping the bond market internationally, it has been possible thanks to the markets of London and New York and Tokyo trading bonds over the hours of the day and might convert a large portion of bonds banks, German, Swiss, English and others to markets in New York and Tokyo as possible transfer New York and Tokyo bonds to the markets of Europe.
Changes the legal and regulatory: The changes of legal and regulatory along with the competitive situation of the market have a significant impact on this market, it has helped organize all of the London and New York, and the creation of institutions such as the euro Claire to control and regulate the exchange of bonds, and that competition is large between institutions dealing bonds helped to market development and increase in size as well.
The share of bank loans bundled and traditional lending market: The size of the bond market, both euro bonds or foreign bonds is affected by bank loans bundled and traditional granted in the lending markets, for the impact of the debt crisis world, in the early eighties and which resulted in the stop a large number of countries to repay their loans collected, many banks reduced the size of sovereign lending, which led to many of the asylum countries is faltering to the bond market, which flourished strongly at the expense of the syndicated loans market.
Diversification of the bond issue: The proliferation of new tools in the field of bonds, like Bonds with the interest rate floating-linked bonds to stocks and bonds that do not carry interest rate and bond guarantee to own it all helped the breadth of the bond market, has been for the efforts made by the borrowers to reduce the cost of borrowing, The high level of expertise that and Zvoha addition to the specialized investment banks seeking to develop service their customers the greatest impact in the creation of these tools.
Borrowing by issuing bonds: The bond loan terms like both of them prove an agreement to restore the amount of the borrower in addition to its usefulness at maturity, and they are similar in that each maturity date can be extended for more than 5 years.
However, the Bonds advantage of the loan in its ability to transform, when submit a bank loan it keep it until the date of repayment, but when you buy it to support what he or she can sell it at any time in the secondary market, which is very important as it allows for investors who need their money selling these bonds long-term at any time require liquidity, and commitment to the writ is a commitment of only one party, Borrower alone is binding to pay the amounts incurred by him, and the investor is not consequent to do anything in the legal sense, as the bond for him is the assets of easy sales can be traded Kalnkd approx.
Advantages of international bonds
Multi-currency version: issued international bonds in different currencies and the dollar remains the currency of choice for the issuance of these bonds, followed by the German mark and takes care of all of the lenders and borrowers in this market when choosing a currency loan on their expectations of future exchange rate of one currency international credit avoid lending currencies strong The lenders opposite.
Collecting savings and redistributed on an international scale: The bond market is international collect savings of all sizes and re-distributed on an international scale and widespread among the various categories of borrowers who prefer this kind of borrowing, or who force them monetary policy prevailing to resort to borrowing from the market, and in such This case represents the international bond market link between savings and are available worldwide to the needs of long-term sources of financing, both to fund its development plans, plans in developing countries, or to finance the deficit in the balance of payments to other countries.
High liquidity: characterized by high liquidity and can be converted into cash by selling them when needed and bonds shall be ensured and guaranteed by the issued by banks and governments.
Lack of the right of control and supervision: In some loans find a lender himself forced to exchange loans in specific aspects The party that granted the loan right to control aspects of the exchange, and the mode of action and implementation, and the success of the project to be financed, while for bonds International, the entity that issued the bonds do not adhere to objects of Investment specific, and does not allow monitoring and supervision of the projects to be implemented.
Risks in international bond deal
The international bonds denominated in various international currency version means that the bond market International is closely linked markets, currencies and dominated from the turmoil and volatility continuing lead in the end lead to influence the decisions of investors on the one hand and to increase the restrictions employed by the monetary authorities of local second hand. In order to protect the national economy from the negative consequences that accompany those fluctuations in the cash markets and international finance. Forcing them in the last revaluation.
In addition, the lender assumes the investor in the international bond unexpected loss when the order payment through stage passes by the international economy in a state of inflation and low purchasing power of money using Wall Street Exposed Review System. Because he participated in the IPO money between high purchasing power but receives at maturity bond loan money with low purchasing power.
We can deduce from this that the international bond market is fundamentally linked, including the international currency market prevails manifestation of stability or instability in terms of supply and demand in terms of interest rates for different maturities.
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