DINEO TSAMELA: Sorting the junk from true value in the world of bond markets
We recently touched on retail bonds — how and why household investors use them when constructing their portfolio. There are two types of bond investors: retail and wholesale. Most of the buyers of bonds fall in the wholesale category and include financial institutions and pension funds with big amounts of capital to invest in this particular asset class. Bonds are a method of finance used by governments and businesses to raise money for long-term projects. Bonds issued by businesses are known as corporate bonds while state bonds are sovereign bonds. In South Africa, the government issues around 90% of all South African bonds. Bonds have a specific term: a year, five years, 30 years, and so on. The term depends on the issuer's capital needs. Bonds are first issued in the primary market. Investors don't have to hold the bonds they purchase to maturity. They can sell them on the secondary market, where bond prices are determined by supply and demand. Most South African bonds pay out in...
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