Which bonds are best to invest in during high interest rates?

The likelihood that the Central Bank of the Russian Federation will reduce the rate is very low. Despite the fact that the main bank of Russia announced that the peak of inflation 🏔️ had passed, prices continue to go up.

In annual terms, April inflation reached 7.83%. This is 0.42% more than in 2023. Therefore the question “TOwhich bonds to buy when the key rate rises?» remains as relevant as ever. Regardless of whether there will be a decline, conservative investors have a chance to make money. You can’t miss it.

⚙️ Do you want to know which bonds are profitable to buy now? The fastest way to find out isleave a request for consultation. Find out for free what is better to invest in to definitely win the kings 🥇.

INSelecting bonds for investment.Pinterest rate forecasts

Economic experts call the passage of the peak of inflation a loud statement. Especially against the backdrop of the fact that the state continues to introduce a lot of finance into the economy 💰.

The current economic model, which includes subsidies, government investment and government orders, gives the budget a strong boost 🚀. It won’t end on its own. Inflation will continue to weigh on the economy. The rate will remain high. Both are part of a long process.

Analysts believe that the likelihood of an interest rate cut is very low. If it does happen, it will be extremely slow. There are several reasons. The main thing is inflation. It does not decrease to the expected level. Including despite the increase in the key rate 🆙.

Even if the depreciation of money goes down and the economy remains active, the Central Bank will not lower the key rate. Under normal conditions, this is a mechanism for stimulating economic growth. Now it is driven by other factors, not expensive loans and deposits. Most likely, the increased rate will remain at least until the end of 2024.

Highest yield bonds. Has the time for debt securities come?

Among the answers to the question “TOWhich bonds are profitable to buy? Now?”Floaters and liquidity funds take pride of place. These are debt securities linked to RUONIA. They show their efficiency and can give high profits 💵.

⚙️ Now floaters and liquidity funds are one of the the most profitable bonds. PWhen key rates are reduced, their income will also fall. This could be a problem.

Securities with floating interest are good against the backdrop of rising key rates or its instability. But if the lending base from the Central Bank has reached its maximum and is more likely to go down,best bonds now — long corporate securities, OFZ. They will be able to bring maximum profit for a long time. Even after the base fell.

Choosing What bonds to buy Among corporate debt securities, one should be wary of those issued for 3 years or less. On the one hand, their returns are lower than those of floaters and liquidity funds. Sometimes she’s on point. On the other hand, when the base begins to decline, such short-term securities will not provide the growth that can be obtained from long OFZs.

Ponderingwhich bonds are better to buy Now, most professional investors are looking towards medium-term corporate securities. This could be a problem. The market is already overheated 🔥. If you invest in it, there is a risk of not making a profit.

Experts note: in December 2023, investors entered into medium and long OFZs. Now they are all in the red. Their coupons were unable to cover the decline in securities prices against the backdrop of rising rates.

⚙️ Everyone invested in long-term securities against the backdrop of high rates. Because of this, their price increased significantly, and the profitability was lower than expected. Therefore, thinking about how to choose bonds to buy, take into account the general state of the market. Other people’s manipulations can hit your pocket.

AAnalysts believe that an attempt to provoke another rally (cause demand for debt securities so that their price rises) is unlikely to succeed. The market will not step on the same rake again in such a short period of time.

⚙️ IHistorical analysis has shown: a gradual increase in the price of government bonds occurs when the Central Bank reduces the rate. It’s not a secret. The protection strategy under such conditions is to supplement long OFZs with floaters. This helps reduce losses.

TOHow to choose bonds for investment

Experts say the expectation of a rate cut has shifted to a later date. Therefore, we can expect an increase in yields in the debt securities market. You can go through these events in two simple ways:

• ⚡ Buyshort bonds with floating returns. They will show the best results during the time when the base is high.
• ⚡ Invest in long papers with a fixed coupon. If the rate falls, the profitability of the asset will remain as high and it (if necessary) can be sold profitably.

Some experts are adjusting this recommendation. Explainingwhich bonds are profitable to buy now,they advise giving preference to floaters.

It is recommended to look towards long-term debt securities starting from July 2024. This is because the Central Bank promises to reduce the base while reducing inflation to 4%. It will take time for the regulator to react.

⚙️ If inflation suddenly decreases, the Central Bank will wait a couple of months and only then begin to reduce the rate. This will lead to the appearance of less profitable OFZs on the market. Just before they appear, it is worth going into long-term debt securities with a fixed coupon.

There are experts who offer a conservative portfolio with minimal risks. For example, half are in securities at 16–16.5% on the money market, another 50% are in short-term securities for 1–1.5 years.

In the worst case (if prices go up and yields go down), the losses will be negligible. Otherwise, income will remain at the same level. Such portfolios can yield up to 18–19% per annum, which is quite good for bonds.

TO which OFZ to buy

Experts recommend taking a closer look at the December issue. There are a lot of papers with high coupons:

• 📣 001Р-04R — “Selectel”.
• 📣 001P-05 – “HC Novotrans”.
• 📣 002R-01 — “EvroTrans”.

It is important to note: securities with a small coupon are more sensitive to market returns than those with a high coupon. Therefore, when withdrawn from the portfolio, such assets can cause a large loss. It is better to stay as far away from them as possible.

What kind of federal loan bonds and corporate bonds buy now

PThe government needs to raise about ₽1 trillion. This opens up interesting possibilities. You need to look towards sub federal bonds, OFZs, which:

• 💎 they promise 16–17% per annum;
• 💎 released for 3 years or more.

5-year OFZs with a 14% profit deserve attention. They can show potential in the long run.

In the corporate sector, a good choice is 1–2-year bonds with a yield of 19%. For example, one of the most interesting options is offered by Oil Resource – 21% profit in the first year.

Substitute papers

Replacement bonds yield returns approaching 6%. This is a very interesting tool. It is one of the few that now makes it possible to hedge currency risks and protect against ruble devaluation. It is increasingly chosen for insurance, but not as the main source of income in a portfolio.

What if you invest in yuan

Debt securities based on the Chinese yuan are not as simple as they seem. On the one hand, they are less profitable than their replacements. In addition, they have a strong competitor – deposits in yuan. They already bring more than 4% per annum. Moreover, such deposits have tax benefits.

Experts do not recommend looking towards yuan bonds. They have too many competitors. Most are short (less than 3 years). It will not be possible to reduce taxes for long-term ownership.