Securities (bills, bonds) for most of the bank's customers are something incomprehensible. In most cases, they are ignored. In this article, we will talk about how a bill differs from a bond and how these papers work.
What is a bill of exchange
A bill is a security that confirms debt obligations of a debtor (drawer) to a creditor (drawer). It necessarily prescribes the amount of the debt, the period and place of repayment of the obligation. All bank bills are made on special paper, which is difficult to fake, or to make changes. The bill must contain the following details:
- The title that indicates the type of bank bill.
- The text of the order.
- Personal data of an individual, or details of a legal entity.
- Amount of debt and interest (if any).
- Place of debt repayment.
- Debt repayment period.
- Date.
- Signature of the drawer (debtor).
A bill can be issued by any competent citizen who has reached the age of majority, or a legal entity. But such a document is not issued by executive authorities.
Bills are divided into two types. The first is simple (when the bill obliges you to pay the debt directly to the creditor).
The second - transferable (when the debt will have to be paid not to the creditor, but to a third party).
Fields of application
A bill can be used in various areas of financial activity:
- Payment for goods and services. That is, debt can be transferred from one person to another. This use of bills is popular in both small and large businesses.
- Banks use the document to attract capital and in the field of lending. In this case, the debt can be transferred or sold to third parties.
Differences between a bill of exchange from a debt receipt
It may seem that a bill and a promissory note are the same thing. But these documents have a number of significant legal differences. A bond receipt may be in free form, while a bill is filled out on a form of a specific form. Obligations on a bill are stricter. They concern only money and ignore the subject of the transaction. The receipt should indicate the amount of debt and a description of the transaction.
Bond definition
A bond is an issue debt document. This paper confirms the fact that the company that issued the bond (issuer) received funds from a citizen. And obliges to pay the debt along with interest (coupons) on time. The interest rate on bonds can be floating and fixed. It will not change over time. The acquisition of bonds carries fewer financial risks than the acquisition of shares in an enterprise. This is due to the fact that stocks can bring both profit and loss. Bonds bring profit to their holder. But they, unlike shares, do not give any ownership rights to the enterprise. In the event of the issuer's liquidation, the bond holder receives a pre-emptive right to the company's assets. What does it mean? If the organization that issued the bonds is liquidated, then the debts on the bonds will be paid first.
Bond classification
Bonds differ in type, form of issue, maturity and other characteristics. Consider this classification in more detail.
By issuer, bonds are divided into:
- corporate (issued by joint stock companies and large enterprises);
- municipal (issued by local governments);
- government (federal loan bonds for individuals);
- foreign (issued by foreign enterprises).
By release form:
- documentary (forms printed on special paper in a printing way);
- non-documentary (presented in the form of electronic documents).
By type of payment:
- coupon (interest income is paid during the bond validity period);
- discount (without interest income);
- with payment of income at maturity.
By term of circulation:
- short-term (circulation period up to one year);
- medium-term (valid from 1 to 5 years);
- long-term (from 5 to 30 years);
- unlimited (circulation period of 35 years).
Key characteristics of bonds
Before acquiring a bond of an enterprise, it is necessary to consider the main parameters of a security:
- Currency. Bonds may be issued in any currency. Interest income and total profit on a security will depend on this.
- Nominal cost. That is, the issuer is transferred an amount equal to the face value of the bond.
- Date of issue and maturity date.
- The amount of coupon income.
How a bill differs from a bond
Despite the fact that a bill and a bond are debt-type securities, they have a number of distinguishing features. Let us consider in detail how a bill differs from a bond.
- These two documents have different functions. The bill guarantees the return of the debt, and the bond plays the role of a deposit instrument that saves money and makes a profit.
- Bonds may be in electronic form. A bill is issued only on a form.
- With the help of a bill it is possible to pay for products and services. At the same time, it is extremely unprofitable to carry out this procedure with the help of a bond.
- Another important point regarding how a bond differs from a bill of exchange is minimal financial risks.
Definition of a federal loan bond
What it is? In the Russian Federation, such bonds were issued only in 2017. Paper circulation term - 3 years. Federal loan bonds for individuals are a valuable form. It is sold to the public to replenish the state budget. Today, this type of bond is the most profitable deposit instrument. Coupon income is paid every six months. In addition, these securities provide for a full refund (without paying income) in the first 12 months after the acquisition.
Bonds of Gazprombank
Most often, banks issue bonds. This type of securities is highly profitable and easy to purchase. Consider the bonds of Gazprombank
On June 14, 2016, Gazprombank issued bonds in the amount of 10,000,000,000 rubles. par value of 1000 rubles. each one. The interest rate for this type of bonds is floating. As of June 2018, it amounted to 8.65%. The term of the securities circulation is 3 years (until June 14, 2020). Coupon income is paid at the bank’s offices once every 6 months.