15.06.2010Nordea's index-linked bond China-India Extra, which matured in June, accrued as much as 12% a year to the investors.
The investment lasted for five years and its yield was based on the performance of the equity markets in China and India. The value performance of the equity indices that were the reference assets was very positive, so those who had invested in the China-India Extra regained the capital invested and an index-linked yield of about 96% at maturity.
An index-linked bond is tailored to the market situation
Index-linked bonds are suited for investors who want to, for example, benefit of the potential of the equity markets without the risk of losing the capital.
It is not always easy or possible to enter an interesting - and from the Finnish viewpoint exotic - market on your own. An index-linked bond is an easy and affordable means of investing in the equities of far-off countries and in raw materials, for example. But naturally index-linked bonds are also built for domestic equities.
With an index-linked bond to the growth markets
The BRIC bonds are now on sale. They invest in the BRIC countries, ie in Brazil, Russia, India and China. The maturity is approximately five years, and the nominal principal of the bonds is repaid at maturity regardless of the performance of the reference asset markets during the loan period.
Even if the bonds are intended to be of the "buy and hold" type, you can sell them before the due date. Read more
Capital protection
The capital protection on bonds issued by Nordea means that at the maturity of the investment the investor regains the nominal capital in full if Nordea does not go bankrupt or fall into serious payment difficulties. Credit exposure events, bankruptcy of the object company or other external factors have no effect on the capital protection. The capital protection does not cover the premium of the Extra tranche. Even if the reference asset were showing a loss, the nominal capital is paid back to the investor at maturity.
Index-linked bonds involve an issuer risk and a premium risk. If the investor sells the bond before maturity, the secondary market price may be higher or lower than the nominal value.
