A complete guide to choosing bonds for private investors

Investments

03.08.2020

14299

Author: Igor Smirnov

Photo: pixabay.com

Bonds are securities that give the right to receive income from the entity that issued them. Bonds may be resold on the secondary market.

Last news:

I want to trade Tesla and Apple shares: how to do this in Belarus?

Attracted the most investments in 2022: top 7 Belarusian startups

To explain what a bond is in simple words, you can do this:

• Bonds are receipts with an obligation to pay a certain amount on a specified date.
• The amount payable on bonds is greater than the amount spent to purchase them.
• Bonds can be resold, in this case the person obligated to pay does not change, but the recipient of the funds changes.

To better understand the place of bonds, you can compare them with shares of enterprises:

Photo: pixabay.com

What are bonds

Bonds are debt obligations in the form of receipts issued by a company or organization that needs to raise capital. Investors take these “receipts”, lend money to the issuer, and receive a small income for this.

When buying bonds, three parameters are usually known in advance:

• sum;
• term;
• profit margin.

That is, an investor can immediately understand what benefit he will receive by purchasing such securities.

Bonds are repaid on time. The issuer pays the owner of the asset the face value indicated on the security itself.

When investing in bonds, the main risk is bankruptcy of the issuer. In this case, the paper holder loses his money, since it is not protected by a deposit insurance system or any other guarantees.

Structured Income Bonds

The main difference between bonds with structured income and structured bonds is that for bonds with structured income, only the amount (or presence/absence) of additional income depends on the occurrence of a particular event (for example, a change in the value of the underlying asset), but not the nominal value at maturity .

The amount of additional income (coupon income) cannot be known in advance, since only the procedure for its calculation is known, but not the occurrence of certain events on which it depends (the value of the underlying assets).

Thus, the initial investment remains protected (at maturity, the investor will receive the par value of the bonds) and the main risks for structured income bonds are the lack of additional income and losses when selling on the secondary market at a price less than the purchase price (market value risk).

At the same time, the investor must remember that the market price of a bond with a structured income can change for many reasons and this is influenced by a significant number of factors - it cannot be said that a change in the value of the underlying asset always and certainly directly affects the market value of the bond and, moreover, cannot be calculated the exact change in the market value of a structured income bond depending on changes in the price of the underlying asset.

What types of bonds are there?

Bonds vary in several ways.

According to the form of profit payment, they are:

1. Coupons . The investor receives a percentage of the par value of the paper. There may be several payments or only one payment on a bond. Typically, coupon bonds have a fixed interest rate; the owner of the asset knows in advance how much profit he will receive. But they also come with varying rates.
2. Discount . Such securities are purchased at a price below par value, but are redeemed at par. The difference between the price at which an investor bought the bonds and the redemption value is called the discount.

By maturity, bonds can be short-term - up to 1 year, medium-term - 2-5 years and long-term - from 5 years or more.

According to the issuer, bonds are:

• state - the issuer is the state, which issues securities to cover the budget deficit;
• municipal - they are issued by local governments to finance projects of local importance;
• corporate - they are issued by legal entities to finance their activities.

Bonds can be issued by the issuer both in Russian rubles and in foreign currency.

Taxation

There are no personal income taxes levied on government securities. But for bonds of private companies they will have to be paid. In addition, for any instruments denominated in foreign currency, revaluation will also be included in the profit.

This factor must be taken into account when comparing bonds of different issuers. If the yield on OFZs and on corporate securities are equal, this does not mean that the first is undervalued by the market, and the second is overvalued. It's all about income or profit tax.

Why do we need bonds in an investor's portfolio?

There are no strict rules for investing “just do it this way or that way.” Each investor himself decides which securities to hold in his portfolio. The composition of assets depends on the financial goal, attitude to risk, availability of free money and investment horizon, that is, the period for which the money will be invested.

Bonds in a portfolio are most often purchased to achieve several goals:

• risk reduction;
• cache alternatives;
• acting as an airbag.

All these areas can be combined or focused on only one of them.

Reducing asset risk

Markets fall approximately once every 2-3 years by 10-20%. With a frequency of 6-8 years, a larger decline occurs - by 40-50%. After the decline, the markets are gradually recovering. But this may take several months or even years.

To make losses less critical, investors add to the portfolio a portion of bonds that are less responsive to fluctuations. This type of asset not only reduces the overall risk of the portfolio, but also makes its recovery faster.

Adding bonds is especially effective to reduce risk when the investment period is less than 5 years. Please note that the higher the yield of the selected security, the higher the risk. This will also need to be taken into account when creating a portfolio.

Cache alternative

Stocks bring the greatest return to an investor in the long term. The best time to purchase these assets is when the market is at its bottom. But predicting a crisis in advance is problematic, and if money is needed urgently, bonds can help the investor. During market downturns, bonds with short maturities from reputable issuers can be sold with almost no loss. And use the proceeds to purchase suitable shares.

During the market recovery period, stocks will become more profitable. After downturns such as the dot-com bust and the subprime mortgage crisis, the market took several years to recover. At the same time, the annual growth was more than 20% per annum.

In stable periods, the yield on bonds of well-known companies compensates for inflation, and on bonds from less reliable issuers, they bring higher profits. But in the second case there are more risks.

Financial airbag

A financial airbag is an amount of money that is enough for at least 6-12 months of living without a permanent source of income. For example, there was a dismissal, a long sick leave or a move to another city. For families with multiple dependents, such a strategic reserve of money is a must.

Without a financial cushion, it is better not to start investing at all. In this case, assets are always at risk. If the investor himself or his family members urgently need money, and there is no reserve, he will sell securities to solve current problems. Most often, such actions lead to serious losses, because assets have to be sold quickly and not at the best price.

If you have bonds in your portfolio, they can partly compensate for the lack of a financial cushion. It is especially beneficial if the bonds are short. For such securities there is the minimum decline even during a crisis, and even more so there will be no losses if the market is stable.

How to invest in bonds

What is a bond

A bond is a debt security that is generally issued for a limited period.
There are two parties to the transaction: The Issuer is the entity that issued these securities to attract additional capital. The issuer is obliged to return to the bondholder the amount borrowed from him and pay a certain percentage (coupon), if this is provided for in the issue prospectus. An investor , by purchasing the issuer's bonds, essentially provides his own funds for temporary use and receives income for this.

The investor chooses the bond maturity period that is comfortable for his investment goals (short-term, medium-term, long-term). Specific conditions, namely the par value of the paper, the frequency of interest transfers (coupon) and terms, are determined at the time of issue.

How does a bond work?

To carry out transactions with bonds, you can open a brokerage account and make a transaction.

According to the type of income generation, bonds are interest-bearing and discount.

The most common type of bonds traded on Russian exchanges is interest-bearing bonds - the issuer pays periodic interest (coupon) during the bond's circulation period. Coupons can be paid annually, quarterly or monthly depending on the terms of the paper.

Interest bonds can be:

• With a fixed coupon - a certain percentage of the face value is paid at predetermined intervals. The interest rate on a bond is known from the moment of issue and, as a rule, is the same for the entire circulation period of the paper. For such a security, you can draw up a schedule of coupon payments with exact amounts and unambiguously calculate the yield to maturity.

• With a variable coupon - the coupon is fixed until the offer date, after which the interest rate changes depending on market conditions. The new interest rate is unknown until the offer is made. This mechanism allows the issuer to reduce interest rate risk, especially if the issue is placed during a period of high interest rates with the prospect of their reduction. And the investor has the opportunity to repay these bonds early under the offer. In the intervals between offers, such securities are no different from bonds with a fixed coupon, with the only difference that the yield is correctly calculated not to the maturity date, but to the date of the nearest offer.

• With a floating coupon - the interest rate is tied to changes in any indicative financial instrument. For example, to the key rate of the Bank of Russia, the consumer price index, the RUONIA rate, the dollar exchange rate, etc. As a rule, it is possible to calculate the coupon size for such securities for no more than one coupon period. The calculation formula is published by the issuer and is available to all investors. The disadvantage is that future profitability can only be predicted. The advantage is that it allows you to insure yourself, for example, against sudden changes in market interest rates.

Discount (zero-coupon) bonds - no coupon payment is provided. Initially placed below face value. The investor's income is the difference between the purchase price of the security and the redemption/sale price.

Classification by type of par value redemption

• Repayment of the face value in full at the end of the term. By default, the principal amount is paid to the investor in full on the bond's maturity date. This type of repayment is the most common among securities on the Moscow Exchange.

• Bonds with indexed par value. Sometimes the float for a bond is not the coupon, but the par value of the paper. This type of OFZ has advantages in times of high inflation or as insurance against a future acceleration in price growth.

• Amortizing bonds. For most bonds traded on the Moscow Exchange, the par amount is paid to the investor in full on the maturity date. However, the issuer may not be comfortable with such a form of borrowing, in which by the maturity date it will be necessary to accumulate a large amount of money to repay the issue. Then he issues an amortizing bond, the face value of which is repaid in installments along with coupon payments. This allows the issuer to distribute debt repayments evenly over the entire circulation period. Such securities are often found among municipal bonds. This type of redemption is less profitable for the investor: after receiving part of the par value, the following coupons are accrued on the remaining value of the paper, due to which the total income is less. However, this type of bond can be useful during periods of low interest rates when interest rates are expected to rise. Then the returned part of the nominal value can be reinvested at a higher interest rate.

Types of risks

Bond prices may change depending on the macroeconomic situation and events affecting the activities of the issuing company. Investors should be aware of possible risks when investing:

Risk of default. Fixed when the issuer is unable to fulfill financial obligations on securities and declares itself bankrupt. In this case, the investor may lose the invested money: unlike deposits, they are not protected by the deposit insurance system.

Bonds are not identical in their level of credit risk depending on the type of issuer. State, subfederal, municipal, and corporate bonds are traded on the market.

• Government bonds - the issuer is the state represented by the Ministry of Finance of the Russian Federation. The most common securities in this category are federal loan bonds (OFZ): they usually have relatively high liquidity, a wide choice of investment terms, and a low probability of issuer default. Among the disadvantages, one can note the low profitability, which is compensation for the low credit risk.

• Corporate bonds are debt securities of individual companies. They are distinguished by higher profitability than OFZ. Often the coupon for them is variable.

• Subfederal and municipal bonds. Issuer - constituent entities of the Russian Federation (subfederal) and municipalities (municipal). The market for these bonds is small, which also affects liquidity. At the same time, the yield of the securities is slightly higher due to lower reliability. It is incorrect to buy regional bonds because of higher yields and at the same time consider them equal in reliability to government bonds.

Inflation risk. Profit on securities and actual income should be adjusted for inflation. In an unfavorable economic situation, there is a risk of receiving a negative real return when the interest received does not cover inflation. Long-term investments are more susceptible to inflation than short-term ones.

Interest rate risk. It is observed when the average market rate on bonds with similar conditions increases. Bonds with below-market interest rates reduce investor returns. This type of risk is usually influenced by the key rate of the Central Bank of the Russian Federation. The longer a bond's maturity, the more its price is affected by changes in interest rates.

Reinvestment risk. It involves reinvesting the income received (coupons) at a reduced interest rate compared to the purchased one. This risk occurs when interest rates fall over an extended period.

Currency risk. Investment can take place in Russian rubles, euros or dollars. Investing in foreign assets is highly dependent on currency fluctuations.

According to the legislation, all payments on the territory of the Russian Federation are carried out in rubles. The vast majority of bonds traded on the domestic market and available to private investors are denominated in national currency. Trading takes place mainly on the Moscow Exchange.

Bonds denominated in foreign currencies (mostly euros and US dollars) are called Eurobonds. The main trading volumes of Eurobonds take place on the over-the-counter market; some securities are also available on the Moscow Exchange.

Credit risk. An important indicator when analyzing bonds is the credit rating. A decrease in the issuer's solvency is reflected in its reputation on the securities market and the price of the bond.

A credit rating is an assessment of the issuer based on a comprehensive analysis of the company, taking into account the financial condition, quality of corporate governance and the level of business risks. The agency forms an opinion about the creditworthiness of the company as a whole or regarding its specific obligations. In essence, by assigning a rating, the ability of the bond issuer to fulfill its financial obligations on these bonds is assessed, that is, to repay them on time and pay income on them.

Different bond issues can have different ratings, even from the same company. And the absence of a credit rating for an issue means that there is no opinion from a credit rating agency about the credit risk of this bond issue.

The rating scale is a system of rating categories that reflects the Agency's opinion on the likelihood of default. Expressed in letters and symbols, from the highest level of reliability (for example AAA) to the lowest (CCC). There is no single global or even all-Russian rating system. However, credit ratings from different agencies, especially high ones, are usually comparable to each other.

Along with the rating, the agencies publish a forecast for it: for example, “stable”, “positive” or “negative”. It shows whether analysts expect an organization's financial position to change in the coming year and in what direction.

The agency reviews the rating of a particular company on a regular basis.

Bond liquidity

Liquidity is the ability of an asset to be bought or sold quickly and without loss in value at the market price. When choosing a bond, an investor should pay attention to the liquidity indicator.

Liquidity risk is the possibility of not selling bonds before maturity at a fair price. Especially if an investor decides to urgently sell the bonds he owns, there may simply not be a buyer. This risk is possible when the issuer is poorly known and there is a small number of transactions with its debt securities.

Bonds can be divided into: - Highly liquid bonds - these are bonds that can be sold without reducing their price; - Low-liquidity and illiquid - unlikely to be sold in a short period of time without reducing their value.

What else is worth paying attention to when assessing liquidity • Average daily trading turnover - the more transactions on a bond take place during the day, the greater the volume of securities an investor can sell in a short time.

• Turnover including only large transactions - Some theories suggest that turnover by category of transactions may be more indicative of liquidity than aggregate turnover.

• Number of days without transactions - the greater the number of such days, the less liquid the bond

• Issue volume - the more securities are in circulation, the greater the likelihood of realizing the required volume through trading on the stock exchange.

• Credit risk - often riskier high-yield bonds are more susceptible to speculation, therefore, trading activity on them is higher and liquidity is higher.

• Volatility – Increased volatility can also have a positive impact on trading turnover and the liquidity of a bond.

• Publicity of the issuer - the more a company discloses information about its activities, the more attractive its securities are.

• Options Built into a Bond - Features such as convertibility, put/call options and other options can also affect the liquidity of a bond.

What taxes does the bond owner pay?

Taxation of transactions with securities is regulated by Article 214.1, Part 2 of the Tax Code of the Russian Federation. The tax rate on personal income of residents of the Russian Federation is 13%.

From 2022, coupons on all bonds without exception, including OFZ, municipal and corporate, regardless of the date of issue and the value of the coupon rate, are included in the tax base and are taxed at a rate of 13% (15% if total income exceeds 5 million rubles). The tax agent is the broker.

BCS World of Investments

Pros of having bonds in your portfolio

Having bonds in a portfolio gives investors several advantages:

1. Stability and predictability. The investor can calculate the exact simple yield at maturity. You can approximately find out the effective yield taking into account depreciation payments and reinvestment of coupons. The portfolio owner always clearly knows when and how much profit he will receive, although there are bonds with a previously unknown income.
2. Low risk . Bonds are the most reliable instrument with an investment period of up to 5 years. Usually this type of asset has a low income, but there is also a higher one - these are bonds of small, little-known companies. If you choose them, it is important to understand that the risk will be significantly higher than that of securities issued by well-known issuers or the state.
3. Minimal losses . If the market collapses, short, reliable bonds can be sold and the proceeds can be used to buy cheaper shares. Prices for this type of asset are subject to less fluctuation, so it serves a partial function of balancing risk and diversification.

Also, a portfolio containing bonds is more stable during a crisis and recovers faster. Bonds in a portfolio reduce its volatility, and with effective asset allocation, you can get higher, stable returns.

Basics

A bond is a security that gives its owner the right to receive a previously known income in the future in the form of coupon payments and full repayment at the end of the term at par.

Drawing an analogy with bank deposits, you buy a bond (open a deposit) according to previously known profitability conditions (interest on the deposit). During this time you receive coupon income (interest on the deposit). Upon expiration, the bond is redeemed (the deposit is closed) and the money is returned to you (the body of the deposit).

The example is rather arbitrary, since there are many other parameters for debt securities that fundamentally distinguish them from bank investments.

One thing is for sure...

Bond yields almost always exceed bank yields.

Bonds are issued by the issuer to raise funds. In most cases, this is much cheaper than taking out a loan and allows you to collect the required amount in the shortest possible time. When you buy a bond, you give a loan to the issuer and earn money from the fact that he uses your money for a certain time.

The main disadvantage of bonds

Bonds are more suitable for those who want to preserve rather than increase capital, since their most significant disadvantage is low yield. If you subtract the inflation factor, the yield will not exceed 1-2% per annum. If profitability is more important to an investor, it is better to keep a significant part of the portfolio in stocks.

In 2018-2020, key rates were at a low level. Investors took advantage of this and purchased long fixed coupon bonds. As a result, the profitability was higher. But now rates are even lower, so government bond yields have fallen to zero, and in some countries even to negative.

To get a higher income, you can invest in bonds of developing economies rather than developed ones. The profitability of such securities is higher, but so is the risk.

Remember that all high yield bonds have a high level of risk. You need to have sufficient knowledge if you plan to take such assets into your portfolio. Don't forget about diversification. Buy bonds of different states and corporations.

The yield of bonds is affected by the fact that from January 2022, a tax of 13% for residents and 30% for non-residents of the Russian Federation must be paid on all bonds. This innovation applies to any bonds: OFZ, corporate, municipal. Based on this, the most “safe” asset on the stock market has become less attractive for investment.

The situation has had the worst impact on conservative investors and those with a short planning horizon of up to 5 years. But a tax on profits received has also been introduced on deposits. Therefore, each investor should independently calculate possible losses and risks and make the right decision to preserve and increase capital.

Where to view the data

All information on the current parameters of a bond on the market is available in the trading terminal. When you enter into an agreement with a broker, you will have access to the stock market. The program conveniently sorts and finds the necessary securities according to specified conditions (yield, size and date of coupon payment, current value, duration, and much more).

In the picture, OFZs are sorted by current yield, to quickly select the best conditions.

Current government bond yields

There are also several websites that specialize specifically in bonds. You can find a lot of things there too. From quotes to the latest news. There are special conditions for selecting interesting papers. You can view current yields, upcoming coupon payments, as well as planned new issues.

List of bond sites:

1. rusbonds.ru
2. cbr.ru
3. cbonds.ru

Some functionality is paid and is available only by subscription. But basic information, which is quite enough for ordinary investors, is freely available.

Comparison of a portfolio with bonds and a portfolio without them

A non-bond portfolio consists only of stocks or other assets. It will be more profitable, but along with the profitability, the investor’s risk also increases. There is no portfolio protection in the form of bonds if the market falls, so the risk of losing all your money will be higher.

A bond portfolio can not only reduce risk, but with proper regular rebalancing, it can increase investor returns.

Even if you are comfortable with risk, it is better to keep part of your assets in the form of bonds. Everyone may overestimate their ability to withstand stress, and if you have no experience investing during major downturns, it is better to insure your portfolio.

During a crisis, you can sell bonds and buy cheaper shares and rebalance your portfolio with more promising assets. Bonds may also fall in price, but not as much as stocks. Moreover, in the period before the crisis, bonds will generate income in the form of coupons.

The optimal ratio of stocks and bonds in a portfolio is 20/80 if your financial goal is less than 5 years away or you are not willing to take risks. For all other investors, the ratio between shares of shares and bonds will be established individually. Some stock market participants do not take bonds into their portfolio at all, but only you can decide whether you should do the same.

Give your rating

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

Is this article useful? Not really

Help us find out how much this article helped you. If something is missing or the information is not accurate, please report it below in the comments or write to us by email

Open IIS

An individual investment account (IIA) is a type of brokerage account, but it was intended by the authorities so that ordinary citizens (like you and me) would start buying stocks and bonds. For this purpose, the state has come up with benefits for those who open an IIS. The rules are as follows: if you deposited up to 400 thousand rubles into your account. and do not withdraw funds within 3 years, then you will be returned a tax deduction in the amount of 13% of the amount in the account. The deduction can be obtained already in the first year by submitting a declaration to the tax office.

Such an account can also be opened through a broker. There is a limit on the number of IIS - one account per person. You can deposit up to 1 million rubles on an IIS, but you will only receive a deduction for 400 thousand rubles. True, in a year you can report another 400 thousand and receive another deduction. However, the second amount must also be kept in the account for 3 years from the date of deposit, etc. If within three years you still withdraw funds, the deduction will have to be returned to the state.

“In addition to coupon income on OFZ, which is not subject to personal income tax, an investor can receive a tax deduction in the amount of 13% of the amount deposited into the IIS. Thus, only in the first year of owning OFZ on an IIS, you can get approximately 21% per annum. Of course, in a year the profitability will decrease, because it will not be possible to receive a tax deduction every year on the previously deposited amount. And yet, the profitability of investing in OFZs through an IIS exceeds the best bank offers for deposits,” explains Alexander Dubrov, head of the online trading department at Otkritie Broker.

You can put not only government bonds on an IIS, but also corporate securities. However, on the one hand, you can get a tax deduction for them, on the other hand, you will have to pay personal income tax on coupon income.

Comments: 0

Your comment (question) If you have questions about this article, you can tell us. Our team consists of only experienced experts and specialists with specialized education. We will try to help you in this topic:

Author of the article: Klavdiya Treskova

Consultant, author Popovich Anna

Financial author Olga Pikhotskaya

Bond default

A bond default is the bankruptcy of the issuer and its inability to make payments to investors. This is one of the key risks traders face when investing in this type of security.

The occurrence of default does not always mean a complete loss of the investment. The investor has the first right to repayment of funds as a creditor. But this process can be lengthy. In addition, there is no guarantee that the proceeds will be sufficient - all bondholders have equal rights and there may not be enough funds.

The most risky include companies with low credit ratings and/or financial condition, as well as organizations that do not have a rating at all. Both have the right to issue bonds, but to attract investors they have to increase profitability. For this reason, the highest-yielding bonds carry the greatest risk and are called “junk”, “junk” or “junk”.

It is worth noting that the fact of default - non-payment at maturity or the current coupon interest, is not always a loss of investment. Sometimes companies fulfill their obligations a little later and distribute payments over a longer period.

Credit rating

Credit ratings are assigned to issuers and individual issues of securities by rating agencies and help investors make the right investment decisions by allowing them to better assess the profitability of a bond in terms of possible risks, as well as the company's ability to pay its obligations. That is, a credit rating is an assessment by a rating agency, formed according to a certain methodology, about the ability of the issuing company to fulfill its financial obligations under bonds.

A bond's rating is directly proportional to its risks, that is, the higher the rating agency's rating, the less likely the investor is to lose the invested funds. But at the same time, the risk is directly related to the yield; accordingly, the yield of a bond with a high rating is usually lower.

It is worth noting that the rating of an issuer or bond issue is not insurance, similar to deposit insurance, and it does not guarantee payment in the event of default by the issuer.

Category A rating

can be obtained by the most reliable issuers - for example, the state or large state-owned companies.

Category B rating

assigned to slightly less reliable organizations that have a small risk of not repaying investors. This category usually includes large corporate issuers that have previously shown themselves to be solvent and have a positive history of doing business.

Category C rating

are received by companies engaged in risky business, and it is very likely that the issuer will not pay on time or will not be able to pay its obligations at all.

Some companies and bond issues do not have a rating, which means that no rating agency has assessed the credit risks of the issuer. In this case, it cannot be said that the absence of a rating directly indicates that the issuer is unreliable or that the default yield on such an issue is higher than on other bonds - for such bonds the investor assesses the risk of investing in such securities independently.

Comparison of bonds with bank deposit

A bond can be compared to a bank deposit, but, unlike a deposit, a bond has a number of advantages. Firstly, the reliability, or, in other words, the solvency of bonds of such companies as Gazprom, LUKOIL, MTS exceeds the reliability of many Russian banks.

Secondly, the bank accepts money for deposit and then issues it in the form of loans. Assessing the quality of a loan portfolio (bank reliability) is an almost impossible task for a depositor.

Thirdly, the bank accepts deposits at one rate and issues loans at higher rates, keeping the difference for itself. By buying bonds, you are lending directly to the company without intermediaries and can control the credit quality of your portfolio.

And finally, if the deposit is terminated early, interest is usually lost and penalties may be imposed. You can sell your bond portfolio at any time; given constant interest rates in the country, you will not lose much in profitability.

Types of bonds by type of security

1. Secured by collateral or mortgages:
   With physical assets. For example, movable and immovable property, equipment, goods;
2. With securities pledged;
3. With the collateral of a pool of mortgages (more details: mortgage bonds);
4. Not secured by collateral or without mortgage:
   Unsecured;
5. Under some type of income of the issuer;
6. For an investment project;
7. Insured;
8. Subordinated (issued only by banks and can be written off);

Secured by collateral are more secure in terms of reliability, but the second type has higher returns. You can call this a risk premium.