How to be a profitable investment in “people” OFZ

In February, 2017 at the Sochi investment forum, Finance Minister Anton Siluanov announced the emergence of a new investment product — the so-called “OFZ for the people”. The issue of “national bonds” is scheduled for mid-April 2017. Authorized agents for the placement and redemption of securities assigned to Sberbank and VTB24.

The volume of the first placement of relatively small — 20 billion rubles, and the denomination of the paper will be 1 million rubles, with maturity of three years. The coupon on the bonds will be paid every six months, while over three years it will gradually increase from 7.5 to 10.4% per annum. The result is the estimated average annual yield of paper will be 8.5%. The main purpose of the bond issue, according to the Ministry of Finance, are improving the financial literacy of the population, and the stimulation medium and long – term savings.

The investor will be able to purchase a package with capacity from 30 thousand to 15 million roubles — this range covers the bulk of the Deposit accounts. Given a sufficiently long period of treatment “OFZ for the people” three years with a gradual increase of the coupon and the possibility of inheritance, it can be assumed that the main purchaser of securities will be precisely those Russians who now hold their deposits in the state Bank (as in more reliable) under the low yield.

But unlike deposits, while investments in “national” bonds should take into account such factors as Commission agent for the transaction of purchase/sale, which is unlikely to be below 1% per transaction. According to our sources, it will be set in the range of 0.5–1.5%. This is a very real value: the decline in lending, banks seek to increase profits by increasing fee and Commission income, which is evident from the statements of the same savings Bank for the year 2016. Against this background, it would be strange to rely on preferential conditions for investors that move funds from deposits in the BFL.

However, such a high Commission can negate all the benefits of “national” BFL compared to deposits. If the banking Commission will be at least 1%, and the investor will hold the bonds to maturity, the real annual profitability of the paper will be 0.33 percentage points below the promised to 8.17%. If the investor decides to sell the bond early (for example, in the year of purchase), he will have more time to pay the agent a Commission of 1%, which completely eliminates all the advantages in yield compared to Deposit. Indeed, in this case the real rate of return “national” bonds would amount to only 6.5% per annum, while the average rate on three-year deposits with the 15 largest banks is now at a level of 7.04% per annum.

If to speak about qualified investors, which are not restricted to placing funds on Deposit, they are “national” bonds, is not likely to be interesting. These people versed in investment matters, and they know about the tens of OFZ issues on the Moscow stock exchange. Offers of securities with different maturities and a yield of 8% on long releases (with a maturity of ten years) to 10% per annum for short (with maturity of up to one year).

For these bonds there are no restrictions on realization (purchase and sale occurs on the exchange with an unlimited number of counterparties), and Commission brokers, including banks, providing access to this market, are no more than 0.1%. Thus, classical OFZ look more profitable option for investment in comparison with “national” bonds and deposits.

Summing up, we can recommend the owners of deposits and all potential buyers to see in the authorized banks with significant conditions of location. First and foremost, you should pay special attention to the size of the Commission and the timeline for deployment — it will allow to understand whether it is possible to purchase these securities in the future if they really will be beneficial, as well as on the amount of coupons.

In the “popular” BFL can safely invest in if the fee suddenly will moderate to 0.1%. It is quite possible that the Commission of the initial placement of “people” BFL will be attractively low, and Commission of the secondary circulation is much more — read the small print, bring a magnifying glass. If the Commission agent will be significantly greater than 0.1% per transaction, it makes sense to buy a classic OFZ bonds with a higher yield on the Moscow exchange.

For example, we can recommend the OFZ 24018 maturing at the end of December 2017 and a variable coupon linked to the refinancing rate of the CBR (5.46% of coupon for the next six months, the current yield of 9.5%) and production 26210 maturing in late 2019 and a yield of 8.3%. General guidelines — choose to buy bonds with large coupon and the price above par, to avoid paying tax on exchange difference at maturity at face value.