Do you want a government bond with interest at 4.625% and a net yield of almost 6% and kick inflation?

Kick inflation with a 6% yield-proiezionidiborsa.it

Risk and return are two sides of the same coin. Typically the investor seeks maximum return with minimum risk, but this is not always possible. These circumstances occurred above all in the 1980s and 1990s, when postal bonds and long-term BTPs offered high yields. Today everything has changed, so to have good returns you need to increase the risk to which the investment is subjected as in the bond that we will see.

The speech, more generally, concerns every class of investment, especially those other than fixed income. For example, those who believe that cryptocurrencies or commodities are safer and more profitable than stock exchanges may have to change their mind in the light of the stellar returns of some stock exchanges in 2023.
Returning now to fixed income, we see a sovereign bond that promises a very good eventual return. In particular, if you want a government bond with interest at 4.625% and a net yield of almost 6% and kick inflation you could consider the following. But beware of the risks!

The thirty-year bond of the Romanian state

The government bond in question it concerns an obligation of the Romanian Government issued in the spring of 4 years ago. The bond has ISIN code XS1968706876with a trading start date of 9 April 2019 e expires on April 3, 2049. This thirtieth anniversary has a gross coupon of 4.625%4.046% net and the periodicity is annual, while the current gross accrual fluctuates on 4.10%.
The issued amount of the bond is 1.350 billion euros (therefore there is no exchange rate risk) and the minimum subscription lot is equal to one thousand euros.

If you want a government bond with interest at 4.625% and a net yield of almost 6% and to kick inflation you could consider this bond

To make the title even more interesting, thecurrent market price. Yesterday the bond closed the trading week at 74.42 cents, while the annual minimum and maximum were equal to 71.85 and 80.50 cents. Instead, the absolute minimum and maximum of the bond in the first (almost) 4 years of life were equal to approximately 63.50 and 138 cents.
So today to buy 1,000 euros of nominal value, you need 742.20 eurosin addition to commissions to the intermediary. At these prices, the annual net effective yield at maturity of the security is 5.94% (almost as much as some real estate investments).
To have a point of comparison, let’s take a BTP with the same residual duration and see how much it yields. The security with ISIN IT0005363111 matures on 1 September 2049, has a gross coupon of 3.85% and an annual net effective yield of 4%. In fact, the BTP is priced at 91.40 cents. Therefore, the higher yield of the Romanian bond is evident.

Maximum attention to risk

We began by saying that risk and return go hand in hand, and the Romanian bond is no exception. The reasons for the rich return must be sought in several factors, above all those of a geopolitical nature. In fact, Romania shares more than 600km of border with Ukraine.
Moral, this thirty-year anniversary could only be suitable for those with a high propensity for risk and with a pure view of portfolio diversification (not all-in). Duration and duration of the bond, inflation, geopolitical risksincrease of public debt (for the flow of citizens fleeing Ukraine) they require an approach Very, very careful. Moral, the Romanian sovereign bond it is yes a lot profitable, but far from suitable for everyone.

THE Ratings on the bonds of Romania are as follows: