The bond market of the Athens Stock Exchange is a rapidly developing market in which bonds from all critical and dynamic sectors of Greek business are traded today.

The domestic corporate bond market is strengthening and today 24 issues are being traded through which 4.6 billion euros have been raised.

In the first two months of 2024, the value of transactions on the bond market doubled compared to 2023 (to €1.8 million) and overall corporate bonds are proving to be a strong option for easy and fast financing with cheap capital for businesses as well as for satisfactory returns for investors.

According to recent data from PwC Greece, for 2023, they amounted to 601 million euros, through negotiable corporate bonds, while in 2022 530 million were raised. for issuing 4 corporate bonds. The issuance of the 7-year bond of Mytileneos 500 million in July 2023 “put forward” the market of corporate bonds and the most important thing is that 91.2% of the bonds were directed to private investors.

In December 2023, Ideal issued a 5-year Euro100m bond with a 5.5% coupon.

2024 opened with two listed public bond issues, of Autohellas and her Intralotraising €200 million and €130 million, respectively.

The alternative investment

Corporate bonds, listed on the Athens Stock Exchange with maturities of 3 to 7 years and indicative yields of 3.75% to 6.75% are directly competitive with deposits, even time deposits. Although the Greek stock market offers high returns and the estimates are particularly positive for the future, investors who do not want a high risk for investing in shares, can also invest in the bond market of the Stock Exchange.

The advantages of investing in corporate bonds are:

– Attractive Yields: With term deposits down from the levels of previous years, investors can diversify the money they have on the side by placing a portion of their available money in corporate bonds that offer more attractive yields.

-Regular Income: Investors who wish to have as stable a return as possible in the form of a steady stream of payments each year from the coupons, can use corporate bonds to have a regular income. At the same time, they await the repayment of the capital they have invested at the end.

-Diversification: By spreading part of an investor’s portfolio in several corporate bonds of different companies and sectors, a reduction of the overall investment risk is achieved.

As with all bonds, corporate bonds increase in value when interest rates fall and vice versa, decrease in value when interest rates rise. Also, the longer the maturity of the bond, the greater the impact on the change in the bond’s price. That is, two bonds with the same fixed interest rate and different maturities have different behavior when interest rates change. The bond with the longest maturity usually shows the biggest change.

However, in a case where an investor has purchased a bond and intends to hold it until maturity, it should not be affected by changes in interest rates since it is certain that it will be repaid at the face value of the bond.

When interest rates rise, new issues of corporate bonds are expected to come to market at higher yields than older ones, so the prices of older issues fall.

When interest rates fall, new issues of corporate bonds are expected to come to market at lower yields than older ones, so the prices of older issues rise.

It is therefore particularly important for an investor to be aware that the price of selling or buying corporate bonds before maturity may be less or more than the face value of the bond at maturity.

The performance

Yield is the most basic concept anyone investing in corporate bonds must understand because it is what differentiates bond investments and enables investment decisions to be made.

Essentially, the yield expresses the percentage of profit or loss from the purchase of the bond, which is based on the purchase price and the interest that the investor will receive through the coupons. In practice, the yield changes by tracking the change in the bond price. For example,

one buys a fixed coupon bond and holds it for 1 year, during which interest rates rise, and then sells it. Based on what we mentioned above, the selling price should be lower than the buying price. Although the investor who buys it will collect the same euro coupon as us who sold the bond to him and will receive the same par value at maturity, the buyer’s return is higher than ours because, simply, he bought the bond at a price lower than the one we bought it for.

There are a large number of performance measures, each with advantages and disadvantages. Three useful measures are:

1. The current yield relates the coupon amount to the purchase price of the bond and is expressed as a percentage of 100 (%). Calculated as:

C

y = —

P

where C is the coupon amount in euros and P is the purchase price of the bond.

If we buy a bond at par, i.e. at 100, then its current yield is identical to the interest rate: the current yield on a bond with a 7.25% coupon that we buy at par is 7.25%.

If the bond price is less than 100 and the bond trades at a discount, then its current yield is greater than the coupon. Example in an 8-year 7% corporate bond whose purchase price is 94.17 : The coupon in euros is : 7% x Euro100 = Euro7. The price is Euro94.17 The current yield is 7/94.17 = 7.43%

If the bond price is greater than 100 and the bond trades at a premium then its current yield is less than the coupon.

The downside of the current yield is that it only takes into account the bond’s coupon and no other sources of capital gain or loss, bond holding time, and coupon reinvestment. Therefore, investors should not buy or sell bonds based on this performance measure alone.

2. The yield to maturity is the annualized yield that a bond yields from the purchase date to its maturity date and is expressed as a percentage of 100 (%). It is the most common performance measure because it provides information on the total return that the investor will have if he holds the bond until maturity. Thus, it allows to compare bonds with different maturities and different coupons in a unified way. The yield to maturity includes all the dividends expected to be paid to maturity as well as the capital gain that the investor will have if he buys the bonds at a price below par (i.e. at a discount) or the capital loss if he buys the bonds bonds at a price above par (ie at a premium). This is the most widely used performance measure, and it factors in the reinvestment of the coupon but based on the yield to maturity.

3. Yield to call is the yield that a bond yields from the date of purchase until the date of its redemption by its issuer and is expressed as a percentage of 100 (%). Because based on the terms of the contract, a bond may have the ability to be repaid earlier than its maturity date, it is useful to define a performance measure based on the schedule of repayments, especially the first one.

How the investor can acquire corporate bonds

Investors can acquire bonds just like stocks, with the same simple and easy process, through the existing network of Members of the Athens Stock Exchange. A necessary condition is that they have an investor’s share in the SAT of HEXA.

For new investors the process can be summarized in 4 simple steps:

  • Cooperation of the investor with the brokerage company or custodian (operator) of his choice
  • Creation and delivery of a customer code (OASIS code) to the investor by the brokerage company/operator for participation in the issuance of bonds or conducting transactions on the Athens Stock Exchange.
  • Application of the investor to the operator for the creation of an investor’s share and a securities account in the SAT for the clearing and settlement of his transactions. The portion contains the investor’s identification information and the securities account contains the domestic and foreign securities held.
  • Investors can buy or sell bonds by giving a simple order to their operator.