What is a bond? How is the bond market formed? A bond is a security that allows you to obtain financial resources with a specified period and interest rate and pay principal at the end of the period and interest quarterly, semi-annually or annually.

What are government securities and notes of the Central Bank?

Government securities and Central Bank notes are the financial instruments with the highest trading volume at the Baku Stock Exchange.

Government bonds issued by the Ministry of Finance can be short-term (1 month, 3 months, 6 months and 1 year), medium-term (2 years and 3 years) and long-term (5 years and more) depending on their maturity. period of circulation. These government securities are issued to finance the budget deficit, being an instrument of internal borrowing of the state. Legal entities and individuals, residents and non-residents can act as buyers of the Ministry of Finance bonds.

Central Bank notes are issued after 28, 84, 168 and 252 days and are used by the Central Bank as an instrument of regulating (sterilising) the money supply. Due to the peculiarities of issue, bonds belong to the same category as notes and are issued as a discount bond as a form of bond. That is, at the end of the circulation period, the entire volume of the bond is paid to the investor by the issuer at face value.

What are mortgage bonds?

Mortgage bonds may be issued only by banks operating in the Republic of Azerbaijan and the Credit Guarantee Fund of the Republic of Azerbaijan. Mortgage bonds are mortgage-backed bonds.

Mortgage bonds are medium and long-term and are issued in interest-bearing paperless form.

What are corporate bonds?

A corporate bond is an undocumented investment security, called a debt, that the issuer holds against bondholders and, depending on the terms, interest (coupon) or discount and principal is paid on a specific date.

Bond yields can be paid to investors in the form of interest (coupons), discounts and mixed (both interest and discounts) depending on the type of issue. As a rule, short-term bonds are mainly issued with discount, medium- and long-term bonds are issued with interest.

According to legislation, bonds are issued only in the form of a deed.

Bonds can be secured and unsecured.

Secured bonds - the obligations arising from them are secured by a pledge, surety, or state or municipal guarantee.

Advantages of issuing bonds: 

• Attracting financing at a low interest rate
• No collateral is required
• Principal is paid at the end of the issue
• Issuer determines the terms and conditions
• No dependence on investors