Learn more about investment bonds

Investment bonds can be linked to interest rates or equities, for example. The value of an investment bond rises when the value of the bond’s underlying asset rises. If the value of the underlying asset falls, you will still get the agreed portion of your invested capital back at maturity. This protects investors who want to benefit from rising markets without having to fear losing the nominal capital in case the markets fall instead.  

Investment bonds are intended as a ‘buy and hold’ type of investment. During the investment period, their price may fluctuate and fall below the subscription price. 

Investment bonds are complex investment products that are suitable for experienced and skilled investors. Always read the bond-specific marketing material and key investor information document before making the decision to invest in any investment bond.

How do investment bonds work?

Capital protected investment bonds consist of two parts: a fixed-income component, which ensures that the nominal capital can be repaid fully or partially at maturity, and a yield component, which is tied to the performance of the market selected as the underlying asset (such as the equity market). The yield component makes it possible for the investor to earn a return if the price of the underlying asset moves in a favourable direction.

Nordea’s investment bonds typically have a term to maturity of 2 to 6 years. Investment bonds are sold either at their nominal value or at a small premium. A premium means that the price is higher than the nominal value, and you will lose this premium if the performance of the underlying asset is negative at the end of the investment period. You can see from the pictures below how the two components of investment bonds work.

Investment bonds’ building blocks

Investment bonds that have a premium involve a higher risk than investment bonds that are sold at their nominal value. As you can see from the picture above, a premium also provides a higher return potential if the underlying market rises. The participation rate determines how much of the underlying market’s gain will be credited to you in the form of a return. The higher the participation rate, the higher the bond’s premium.

Look at the table below to see how a capital protected investment bond behaves in different market scenarios. The impact of costs has been accounted for in the bond’s value at maturity. Structured products are always a ‘buy and hold’ type of investment, and you are recommended to remain invested in them until maturity.

Subscription price100% (no premium)110% (a 10% premium)
Investment1,000 euros1,100 euros
Participation rate70%135%
Value at maturity when:
Underlying market falls 30%1,000 euros1,000 euros
Underlying market rises 30%1,210 euros1,405 euros 
Further information
Disclaimer

Nordea Bank Abp’s bond programme

The investment bonds are issued under Nordea Bank Abp’s bond programme. When you invest in a bond issued by Nordea, you accept the risk related to Nordea’s repayment ability. Detailed information about investment bonds is available in their terms and conditions and prospectuses. You can find all our prospectuses at www.nordea.comOpens new window.

Disclaimer

Nordea Markets is the commercial name of Nordea’s international capital markets operations.

The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets on the date of this document and are subject to change without notice. This document is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient.

The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results.

Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction.

This document may not be copied, distributed or published for any purpose without a prior consent in writing of Nordea Markets.

Applicable additional information when this material is distributed in the United States.

As regards the United States, to the extent that this material includes an analysis of the price or market for any derivative and the exemptions allowed by the definition of research in the U.S. Commodity Futures Trading Commission (CTFC) regulations cannot be applied to this analysis, this material has been prepared by an employee engaged in sales or trading operations and not by Nordea Research. Any views and/or opinions expressed in this material are therefore the views and/or opinions of Nordea’s relevant sales and/or trading unit, and may not reflect the views and opinions of Nordea Research. The sole purpose of this material is to solicit derivatives trading.

None of the presented historical or simulated performances, including back testing, modelling or scenario analysis, is an indication of future performance. The accuracy, completeness or assumptions of any modelling, scenario analysis or back testing cannot be guaranteed. All the views and estimates presented in this material are based on the situation at the time of publication and are subject to change.

Nordea Bank Oyj, Satamaradankatu 5, FI-00020 NORDEA, Finland, domicile Helsinki, Business ID 2858394-9.

Read more about Nordea at www.nordea.comOpens new window