In today’s business segment of the Daily Nation there is a report of Jamii Bora Bank corporate bonds that had more than 102% subscription of its corporate bonds issue. Yesterday we had a brief on Treasury Bonds, and today we can have a glance at corporate bonds. Jamii Bora Bank has an elaborate expansion program where it aims at opening a branch every month for the next 2 years and also plans to compete with the bigger players in real estate investments. For this it turned to the corporate bond market for capital. Corporate bonds are an avenue of raising capital for corporate which gives investors a chance to invest their money for a period, in most cases 2 to 8 years, and thereafter receive their initial principal, plus the interest less tax. The difference between treasury and corporate bonds is corporate bonds trade in the secondary market where you can buy and sell. You will hear over biz news about the bond market and that’s where the action happens. The Kenyan Bond market is however a bit dull with corporate bonds investors not willing to part with them due to interest risks. Since corporate bonds have higher interest returns than govt bonds, fund managers (many investors use them since they are experts in the investment market) are reluctant to part with them opting t hold them till maturity. Centum bonds floated in 2008 have never traded with investors just waiting for their maturity when they receive their investment plus interest. So in short, when you hold a corporate bond in a company, you are their creditor and they owe you money. Incase the company falls (kuanguka) a bond holder ranks higher than a shareholder so you will get paid first. To invest in the bond market, you need to open an account with the investment bank or broker arranging the issue who facilitates your purchase. You later receive a bond certificate from the registrar, with the certificate showing the face value (your investment), maturity and coupon rate that is the interest that you receive from your investment.To cut the long story short, those are YOUR INVESTMENT BASICS FOR TODAY.
Posted on: Tue, 27 Aug 2013 07:36:05 +0000
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