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I am looking into buying a bond on DeGiro. I am new to this platform and to buying bonds. From what I understand, bonds are usually issued in multiples of 1k and have a coupon rate that is paid to you yearly.

e.g. 1,000 and 8% of the 1000 is paid to you once per year and the 1,000 is paid to you at the end of the term.

However, when I log into DeGiro I see a completely different picture. enter image description here enter image description here enter image description here

7.5%JAN23

What I understand: I will be lending them 1000 until Jan 2023 at a coupon rate of 7.5%.

Why do I need to pay 1122.60 for the bond and will the coupon rate be applied to the extra that I have paid?

Why did someone pay 1200.00 for these bonds last year?

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Why do I need to pay 1122.60 for the bond

Becasue that's what someone holding this bond is willing to sell it for.

Rather then looking at the coupon, you should look at the yield (which is strangely not shown for this bond). The Yield tells you what you are earning relative to the purchase price. The higher the purchase price, the lower the yield. In this case the yield is actually negative; you pay more now that you get back in principal and coupons.

and will the coupon rate be applied to the extra that I have paid?

No, the coupon is always based on the face value, not what you paid for the bond.

Why did someone pay 1200.00 for these bonds last year?

This is a Netherlands government bond that was issued in 1993, and NL bonds that are issued now are not paying nearly 7.5%, so a bond that pays 7.5% is very valuable compared to recently issued bonds. If the purchaser was just speculating, it means that they thought interest rates would actually go down further, meaning their bond would be even more valuable.

Why you would buy a bond with a negative yield versus just holding the cash is a separate (and more complex) question.

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