Subordinated bonds are a kind of bonds, which are in a secondary position in terms of paying debt equity. Compared with ordinary bonds, subordinated bonds have the following differences:
1. Debt priority: subordinated bonds are in a lower debt priority position. In the case of debt default, the first repayment is the interest and principal of ordinary bondholders, and the subordinated bondholders are in the later repayment order.
2. Risk and return: The risk of subordinated bonds is relatively high, because in the event of debt default, the holders of subordinated bonds may not be able to obtain repayment of all or part of the principal and interest. Because of the high risk, subordinated bonds usually provide higher interest rate returns to attract investors.
3. Market position: The market position of subordinated bonds is relatively low. In the bond market, ordinary bonds are generally preferred by investors because of their lower risk and higher repayment priority. Subordinated bonds are usually purchased by investors or professional institutions with high risk tolerance.
4. Redemption: The redemption of subordinated bonds mainly depends on the financial status of the issuing company or institution. If the financial condition of the issuing company or institution deteriorates, the holders of subordinated bonds may face a higher risk of default.
5. Investor choice: The main reason why investors choose to buy subordinated bonds is their high return rate. However, investment in subordinated bonds requires investors to have certain tolerance and risk identification ability for risks.
The specific characteristics and repayment order of subordinated bonds may vary with different issuers and bond contracts. Before investing in bonds, investors should carefully understand the terms and conditions of bonds, assess their risk tolerance, and consider professional financial advice.
