During periods when bank interest rates rise, which means more expensive borrowing, stock prices fall, but bond rates rise and become more attractive because of their stable returns. Last year, bonds in the amount of 245 million euros were issued in Latvia, while in the first four months of this year the amount has already reached 112 million.
Bonds are promissory notes, that is, the bond issuer undertakes to repay the lenders the amount of money lent, as well as to additionally determine the coupon rate.
As Edmunds Antufjevs, head of corporate finance at Signet Bank, explains during a guest appearance on “Future Capital”, contrary to shares whose value cannot be accurately predicted, the buyer of bonds knows how much money he will get back, as the repayable amount and the interest rate are fixed. “There is a specific period for which the company borrows, in the Baltics this period is 2-3, maybe 5 years,” says Antufjevs.
Both companies and countries can issue bonds. Traditionally, loans to countries are considered one of the safest, so the interest rates are relatively low there as well. Both companies and countries compete for investors’ money, so smaller companies and smaller countries traditionally offer more attractive interest rates to investors.
2023-05-18 10:00:03
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