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Yield of corporate bonds is lower than inflation rate in Azerbaijan

05 September 2008 15:59 (UTC +04:00)

Baku. Vahab Rzayev - APA-Economics. There are 24 issues of corporate bonds by 13 issuers in Azerbaijan.
Baku Stock Exchange told APA-Economics that yield of bonds varies in the range of 13-18% per annum and this range is 13-14,5% per annum for most issues .
Corporate bonds are similar to bank deposits on its functionality. Despite the fact that the profitability of bank deposits currently stands at the range of 14-22% per annum, for many features, this instrument is similar to corporate bonds.
Interest on deposits and bonds are calculated quarterly and annually, while 2-3 years ago, dividends paid on bank deposits was just withdrawn once a year (at the maturity).
The total amount of corporate bonds placed on the stock market of Azerbaijan in January-August 2008 exceeded 32 million manats, up 36% from the same period last year.
Given that the total issue of bonds in circulation is 80 million manats, we found out that despite the decline in profitability for the past years, placement of bonds is at a satisfactory level.
However, given the current level of inflation (20%), placement of bonds with a lower yield looks unrealistic. Actually, this shows the lack of alternative investment instruments for corporate and private investors in the financial market of Azerbaijan.