These correspond to instruments that represent obligations of foreign private entities or foreign governments and central banks that are issued and sold to the public in order to obtain resources to finance the issuer’s assets. Through these instruments, the issuer commits to repay the principal on a given date and to make annual interest payments on the principal outstanding.
This product has two potential target markets: First, if the investor decides to hold the investment until the agreed-upon maturity date, the returns are known ahead of time, making it a savings alternative. Second, if the investor purchases the bond to speculate on price variation, it provides an investment alternative. In order to invest in these products, the client must open a foreign investment and custody account through Tanner Corredores de Bolsa S.A.
Risk: The risks related to foreign fixed-income instruments refer to: the possibility that the issuer does not fulfill its payment commitments (interest or principal), which is also known as entering default; potential differences between the sales price (market price) and the initial price (purchase price), depending on interest rate levels, if the client decides to sell the instrument before maturity; fluctuations in value based on changes in the denomination currency versus the Chilean peso because the instruments are denominated in foreign currencies; and the prospect of principal and interest being prepaid (at pre-set dates and prices), which is available for certain bonds and could impact the client’s returns.