What Are Commercial Bonds?

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What Are Commercial Bonds?
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• Three types of bonds are available to investors
  on the stock market by a financial intermediary
  classic, exchange-traded, and commercial. The
  main differences between the issues of different
  types of bonds for issuers are in the
  requirements for sets of documents, terms of
  consideration, information disclosure, and
  registration costs.Commercial bonds are loans
  raised by the issuing company from a financial
  intermediary. In essence, it is borrowing on
  trust, the degree of which is expressed in the
  value of the interest rate. It would seem that
  the higher the rate, the more attractive, but no!
  The main risk of business bonds is an incorrect
  assessment of the issuer's credit quality. And
  the higher the rate, the more care and
  scrupulousness the investor needs to show when
  making a decision.

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• Circulation on the over-the-counter market and
  initial public offering by private subscription
  make CBs similar to bank loans and promissory
  notes. "What does the bill of exchange have to do
  with it?" You ask. And we will answer.Since the
  appearance of business bonds to the present day,
  most of these issues are club issues, designed
  for several large investors. Such transactions
  were previously carried out by companies for
  domestic lending. And now the nature of the
  initial placement allows the use of CBs for
  intra-group lending of the issuer. According to
  lawmakers, the mission of CBs in the market was
  initially to create an alternative for the
  unregulated bill market.What to look for when
  choosing commercial bonds?

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• Having analyzed the history and features of
  business bonds in a little more detail, one can
  come to the conclusion that they have not so many
  differences from exchange-traded bonds. Both
  financial instruments by financial intermediary
  have the same essence - this is the issuer's
  public debt. From the point of view of
  protection, all the same, provisions apply to
  commercial bonds as to ordinary bonds.
• But there are still some differences between
  exchange and commercial bonds.    Firstly, even
  if there is control on the part, the issuer of
  business bonds is not obliged by law to disclose
  information to the extent that the issuer of
  exchange bonds should do it.    Secondly,
  business bonds are characterized by limited
  liquidity in the secondary market, since from the
  point of view of listing these securities are not
  related to the exchange and are not traded on it,
  that is, you will not find them in the broker's
  application.

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• Pros of commercial bonds    Higher yield than
  comparable exchange-traded bonds    CO can be
  partially or fully sold on the secondary market
•     Commercial bonds are sold at par in the
  secondary market    There is no volatility.  
   Cons of commercial bonds    Difficulty buying
  during the initial placement (due to the
  placement procedure by private subscription)  
   High entry threshold for investors (including
  broker and depository commissions)  
   Information vacuum around the issuer (due to the
  absence of a mandatory requirement for the issuer
  to disclose information).

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