The Negotiable Obligations (ON) are debt securities issued by companies, financial institutions, and public organizations in order to finance their operations or projects. They are also known as corporate bonds in market jargon.
These are fixed income instruments, which means that they offer a pre-established return in the form of interest over time just like a bond, in this way the investor can know in advance the payment scheme and the income that will be obtained. obtain, that is, we will know your forward flow of funds. The issuer of the instrument undertakes to return the money to the buyer of that bond, normally plus a separate interest set in advance, known as the coupon.
When investing in Negotiable Obligations, investors become creditors of the issuing entity and have the right to receive payment of the agreed periodic interest, as well as the return of the capital invested on the maturity date of the title. A no small fact is that the profile of a bondholder is usually Conservative / Moderate. Depending largely on the title, the issuing entity and its issuance conditions.
On the other hand, an important characteristic of the Negotiable Obligations is that they can be traded on the secondary market before they expire. This means that investors have the possibility of selling their securities to other investors if it is necessary to unwind the position and the possibility of acquiring the instrument after its issuance, this provides liquidity / volume to the instrument until its maturity.
Important information to take into account when analyzing Negotiable Obligations:
- Issuer: Refers to the country where the debt certificate was issued.
- Currency of issue: Refers to the currency in which the debt certificate was issued.
- Coupon: It is the detail of the rent/coupon payment, that is, the interest you are paying. If the coupon is paid in full at maturity, that is, it will pay the interest at the end of the life of the bond, it would be a zero-coupon bond.
- Amortization: There are bonds that return the capital periodically instead of doing so in full at maturity. Or they give everything back at the end, known as a “bullet” bonus.
- Issue date and expiration date: Reflect the dates on which the instrument comes into force and its termination.
- Minimum sheet: To buy or sell bonds, we must know the minimum amount for which they operate, to know the minimum amount for which we can operate.
- Residual value: Indicates the amount of capital that has not yet been paid by the issuer, that is, the proportion of unamortized capital.
- IRR: The IRR (internal rate of return) is the expected annual return of a bond. It is the difference between the value that they will return at maturity and their purchase price, it is always expressed as a percentage. The IRR and price have an inverse relationship. That is, the higher the price of the bond, the IRR goes down and its counterpart, if the price of the bond goes down, the IRR goes up. Additionally, the IRR also indicates the intrinsic risk of a bond. Therefore we will expect a higher IRR on weak credits than on solid ones.
Negotiable obligations: In what currencies can these instruments operate?
Pesos: They can be operated in the national currency. In the case of ONs, we identify the ONs operable in pesos since they have an “O” at the end of their ticker. Example: YMCJO/NPCBO
MEP dollar: The MEP dollar is the one used for local operations in dollars. We identify those operable in MEP since they have a “D” at the end of their ticker. YMCJD/NPCBD
CCL Dollar: The CCL dollar is the one used for foreign operations in dollars. We identify those operable in CCL since they have a “C” at the end of their ticker. Example: YMCJC/ NPCBC
Frequently asked questions about negotiable obligations:
How much can I start investing with?
You can start investing according to the minimum Bonus sheet. Generally, there are ONs that have a minimum blade of 1, 500 or 1000. That is, in the case of a minimum blade of 1, it could be operated per unit.
What currencies can I operate in?
As we mentioned previously, operations can be in pesos or dollars (MEP or CCL) with the possibility of buying in one currency and selling against another, as long as the investor is in a position to be able to carry out these operations (current regulations) and there is volume. in the species that you want to operate on.
What jurisdiction do the Bonds have?
The Bonds can be Local Law (ARG), or Foreign Law (NY). These determine the system of laws that applies and the courts where disputes will be resolved, if any.
Who regulates these instruments?
The emision of Negotiable Obligations It is regulated by the National Securities Commission (CNV) and is a common option used by companies and institutions to obtain additional funds and diversify their financing sources.
Where are amortization and interest coupons deposited?
Payments are made through the Caja de Valores, which credits the funds to each of the depositors, and then to each of the clients.
Where can I corroborate more information about the Bonus?
We will be able to corroborate more information about the Bonds by accessing its Issuance Prospectus from the official information portals of the CNV. (Example: MAE Portal to see the different emissions)
It is important for investors to consider the risks associated with these investments, such as the credit risk of the issuing entity and market conditions, before making investment decisions.
The main suggestion is that if one is interested in including this type of instruments in the portfolio and does not have much knowledge, seek help or information from your account advisor since it is important that the instrument adapts to our needs and objectives going forward.
Source: Ambito
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