Trading of securities on stock exchanges
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Structured Bonds and Structured Notes
Collective bonds with a nominal value of usually CZK 10,000, the yield
of which consists of a premium.
Structured Bonds and Structured Notes
Structured bonds (or Premium Bonds) are global notes usually with a nominal value of 10,000 CZK whose yield consists of a premium. The amount of the premium depends on the price development of the selected underlying assets.
Structured notes also referred to as Premium Structured Notes (PSN) differ from premium bonds in that depending on the development of underlying assets, less than 100% of the nominal value may be paid out on the maturity date. Two types of structured notes exist according to the type of capital guarantee. Products with a limited guarantee: pay at least a predetermined percentage of the nominal value on the maturity date (e.g. minimum of 90%), so the client knows the maximum possible loss in advance. Products with a conditional guarantee: pay a minimum of 100% of the nominal value on the maturity date, unless the capital protection barrier is breached, which is typically linked to the development of the underlying asset (e.g. the underlying index may not fall by more than 50%). If the barrier is breached, the client suffers a loss equivalent to the loss of the underlying asset for the observed period.
The purchase of a Structured Bond will enable you to invest on the stock or commodity market without the risk of loss of the invested amount for a predetermined period. The payout of the interest yield and nominal value is guaranteed by their issuer.
The purchase of a structured note will enable you to invest on the stock or commodity market with the possibility of gaining an attractive yield, which is significantly above the level of term deposits and savings accounts. The client incurs the risk of capital loss, however the maximum loss is either limited or the possibility of loss is effectively reduced thanks to a conservatively set barrier. The maximum duration of the investment is always known in advance. A popular and often used parameter in these products is the possibility of automatic early repayment.
Your advantages
- Thanks to the fixed maturity date, other investments can be planned. Thanks to the possibility of automatic early repayment, you can gain the invested money together with an attractive return yield earlier.
- The possibility of participating in yields of stock or commodity markets without the risk of loss of invested amounts.
- Bonds and structured notes can be purchased at branches of Česká spořitelna.
You should know
- Before maturity, the price of a structured bond or structured note, depending on the development of the interest rate and underlying assets, may fluctuate above or below its nominal value. Structured bonds and structured notes are kept in the records of Česká spořitelna, which purchases and sells bonds and structured notes by the transfer of notes in the register of shareholders. The share in the bond or structured note is credited to the investor’s asset account within 2 business days after ordering a purchase, if the investor also makes payment with the order.
- The price for the procured sale of senior bonds, structured bonds and structured notes, subordinated and other bonds is expressed in percentages of the trade volume. You can find details in the Price List.
- You can find issue additions of bonds and structured notes issued by Česká spořitelna on the investment portal www.investicnicentrum.cz.
What else should you know
The product yield is paid out usually on the maturity date with the bond nominal value. The price for which bonds are purchased is also important for the real investment yield. The price of a structured bond is affected both by the development of market interest rates and the development of underlying assets determining the premium amount. The yield to maturity is not calculated for structured bonds.
Structured notes may have a predetermined or unknown yield amount. Then the payout of their nominal value always depends on the development of underlying assets. The yield amount, just as in structured bonds, depends on how the underlying assets will perform. Unlike structured bonds, the price depends less on the development of interest rates, but is more sensitive to the development of underlying assets, especially if the underlying asset approaches the capital protection barrier. An aliquot interest yield (AIY) is determined in structured notes with a fixed yield. The yield to maturity is not calculated.
… an increase in underlying assets?
Issues made so far that aim to increase the prices of the underlying assets react positively to the increase in their prices
… a fall in underlying assets?
Issues made so far that aim to increase the price of the underlying assets react negatively to the fall in their prices
Income from the holding and selling of foreign bonds and structured notes (ISIN does not start with CZ...) is not subject to final withholding tax, but is subject to individual taxation, and if not exempt from tax, the taxpayer is obliged to declare this income in the relevant section of a tax return.
Taxation of investment yields
Terms of purchase and sale of bonds and structured notes
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