The municipal bonds that offer much higher yields than the banking deposits or the T-bills are now working their way to the Bucharest Stock Exchange. The last two cities "listed" on the Stock Exchange are Cluj-Napoca and Predeal.
Until the time for the T-bills to be listed on the Stock Exchange comes, the brokers are "trying their hand" at municipal bonds. These equities are the only alternative to shares so far, after the failure of a handful of corporate bond issues on the Bucharest Stock Exchange.
The bonds in the second issue of Predeal and the first issue of Cluj-Napoca can now be traded on the BSE. The 7.5bn ROL bonds are to be repaid in three instalments, with the final tranche scheduled for April 2006.
The two bond issues now add up to the other four traded on the BSE: Predeal (the first bond issue), Mangalia, Zalau and Alba Iulia. Furthermore, the capital market has also seen bonds issued by Breaza, Bacau, Targu-Mures, while several other local councils, namely those from Oradea, Slobozia and Vatra Dornei are preparing to release such bonds. Oradea's 100bn ROL bond issue will probably be the most significant this year.
The quote is set as a percentage of the par value, in addition to the interest for the period of time since the last coupon (i.e. the latest interest payment). For instance, if the face value of a bond is 100,000 ROL and a 24% interest is to be paid once a year in January, a 105 quote in late March means the seller will get 105,000 ROL plus the interest for the first two months, that is 4,000 ROL so that the total price reaches 109,000 ROL.
Under the circumstances, the person who bought the bond at a price below the par value, will accept a lower yield than the interest of the bond (calculated according to the face value).
The price of bonds on the mature markets varies according to the interest trend on the money market. A rate decline on the monetary market usually pushes the bond price up.
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