Bonds vs Real Estate
Which pays more: a bond or a flat to let. Yield waterfalls on live Moscow Exchange and Bank of Russia data.
The cost of money
Bank of Russia key rate, RUONIA and the OFZ zero-coupon curve at 1 and 10 years, % a year. The dashed line is the chosen date
Sources: Bank of Russia (key rate, RUONIA, weekly points), OFZ curve from ISS MOEX (start of each month, the last point is today).
Bond
Type, term and coupon pick issues from MOEX; the waterfall follows the chosen bond: coupon and discount make up the yield, which also equals the OFZ curve plus a risk premium
Rental property
A flat to let: net rent to price plus price growth
How it is calculated
Bond
Yield to maturity (YTM) is split two ways. By cash flow: the current coupon yield (coupon divided by price) plus the discount, i.e. the pull of the price to par spread over the term; if the coupon is above the market, the bond trades above par and this part is negative. By risk: the OFZ zero-coupon curve at the same term plus a premium for credit risk and liquidity. The model bond is priced from YTM with semi-annual coupons. For corporates and high yield, expected default losses are deducted from YTM, showing what an investor gets in hand on average.
A specific issue
Rouble bonds with a fixed known coupon from MOEX (OFZ, corporates, the high-risk sector). Price, coupon, effective yield and the G-spread to the curve at the duration come from ISS MOEX; for bonds with a put, to the put date. The coupon yield is taken on price, the discount up to the nominal yield, and the gap between effective and nominal yield is shown as coupon reinvestment. Exchange data carry no rating, so expected defaults are not deducted for specific issues. Corporates with a spread of 5 pp or more and the high-risk sector are grouped as high yield; by default the list shows the most traded issues of the day, the rest can be found by search.
Property
Current yield is the year's rent after vacancy, property tax, repairs and fees, as a percentage of the price. Without a loan the total is the sum of the two. With a loan everything is on own money: rent and price growth come from the whole flat while only (1 − loan share) is invested, so both are multiplied by the leverage, and loan interest is deducted. If the loan rate is above the flat's return, leverage lowers the total. Repaying the loan principal is not counted: it is saving, not a cost.
Date
The «Date» switch shows the market one, two, three or five years ago: the OFZ curve on that date (ISS MOEX), the key rate (Bank of Russia) and the market mortgage rate derived from it, while the flat's price growth is the change in the Domclick Moscow index (MREDC) over the 12 months before that date. The list of issues for a past date comes from that day's MOEX trades: price, coupon, yield, duration and term are as of that date, the spread is to that day's curve. The list holds today's fixed-coupon rouble issues and all OFZ redeemed since. There is no historical series of rents, so rent stays on the slider. When the date changes, price growth and the loan rate are set to the market, and you can move them from there.
Reinvestment
The button at the top turns it on and off on both charts at once. For the bond, coupons are reinvested at the same yield: that is the gap between effective and nominal yield. For the flat, rent arrives monthly and is reinvested at the same total return until the year end (with a loan, rent less interest, at the return on own money). Without reinvestment the bond shows its nominal yield and the flat the plain sum of rent and price growth.
Sources: ISS MOEX (OFZ zero-coupon yield curve; bonds; Domclick MREDC index), Bank of Russia (key rate, RUONIA). The market mortgage rate is the key rate + 4 pp. Returns in roubles before tax. Not investment advice.