Convertible bonds are a special kind of bonds, which have the dual characteristics of debt and equity, and can be attacked and defended, similar to a principal-guaranteed **. For example: Zhang San opened a company and needed financing, so he asked Li Si to borrow 1 million yuan for a period of 5 years with an annual interest of 1%. Zhang San and Li Si agreed that if the company develops, the 1 million borrowed before will be counted as Li Si's shares in Zhang San's company, and the interest will not be repaid, and if you want to get back the 1 million in the future, you can only sell the ** in the market. This is a convertible bond.
The interest rate of convertible bonds is usually very low, only 1% and 2%, and there are even convertible bonds with 0 interest rate abroad. Therefore, as a bond, convertible bonds do not make much money, and at most they protect the principal. In fact, convertible bonds are a low-cost financing tool for listed companies. Because the financing cost of ordinary bonds is generally more than 6%, in contrast, the financing cost of convertible bonds is much lower. Therefore, a company that is able to issue convertible bonds is equivalent to getting the cheapest money in the market.
For investors, convertible bonds are often used as a defensive counter-attack tool. In a bear market, convertible bonds will be accompanied by the stock price, but there will be a bottom line, and after reaching this bottom line, they will be rejected, which is the "capital preservation" feature of convertible bonds. When the bull market comes, the spring of convertible bonds will come. After the stock price, the convertible bond is equivalent to most of the votes, and it will also soar. Investors who hold convertible bonds do not have to convert convertible bonds into ** at this time, and they can directly sell them to enjoy the profits.