Fractional Bonds & Sukuk

Add a valuable piece to your portfolio: Invest now in Fractional Bonds & Sukuk

Diversify your investment portfolio seamlessly with Fractional Bonds & Sukuk, a new way to gain access to the world of international and regional fixed-income securities - one fraction at a time with an investment minimum of USD 5,000

Key benefits

An all-new innovative proposition - turning traditionally large investments into affordable opportunities for financial growth

Start building a bond/sukuk portfolio

Diversify your investment

Have an alternative source of income

Invest in affordable amounts

Bonds provide regular predictable income through periodic coupon payments

How do Fractional Bonds/Sukuk work?

Fractional Bond & Sukuk facilitate buying a small nominal quantity of an underlying bond or sukuk rather than the standard market minimums. Instead of purchasing one bond or sukuk with an investment minimum of typically USD 200,000, you can now allocate to multiple securities in USD 5,000 denominations.

Fractional Bonds & Sukuk are an exclusive offer for Emirates NBD customers. Given the structure of fractional ownership, bonds & sukuk purchased by investors under this program can only be subscribed and redeemed through Emirates NBD.

Key features of bonds

Buying a bond in primary market means you are lending out your money to the issuer
Buying a bond in the secondary market means, the bond was issued earlier and now you are buying the existing bond from another investor. You may hold it till maturity or sell it before the maturity date
The issuers of bonds are primarily governments or corporations
A bond is characterized by its ISIN, Issuer , coupon rate, and maturity
Bond price and Yield to Maturity are inversely related. When yield goes down, price goes up, and vice versa
Government bonds are considered the safest bonds, followed by Municipal Bonds and then Corporate Bonds. However, Government bonds can also default
Bonds are not risk free. It’s possible - for the issuer to default on the debt payments

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A helpful guide to Bonds and Sukuks

What is bond?

A bond is a debt security issued by a government/corporation or any other entity to raise funds. It is a contract to repay borrowed money with interest at fixed dates (it is like a loan where the issuer is the borrower, and the holder is the lender). Bonds are not capital protected, and you can lose your money.

What is sukuk?

Sukuk is a form of Shari'ah-compliant fixed-income capital markets instruments that represent an interest in an underlying funding arrangement structured according to Islamic finance norms. Investment Sukuk are certificates of equal value representing undivided shares in ownership of tangible assets, usufruct, and services or (in the ownership of) the assets of particular projects or special investment activity,

How do bonds work?

Bonds are issued to fund day-to-day operations or to finance specific goals. When you buy a bond, you are lending your money for a certain period of time to the issuer. In exchange, the borrower promises to pay you interest every year and to return your principal at ‘maturity’, when the loan comes due, or at ‘call’ if the bond is of the type that can be called earlier than its maturity (more on this later). The length of time to maturity is called the ‘term’.

What is the bond notional and interest payments called?

A bond’s notional value, is known as its ‘par value’ which is typically 100. Its interest payment is known as its ‘coupon’.

What are the clean price and dirty price of a bond?

The clean price refers to the bond’s price excluding accrued interest. In contrast, the dirty price includes both the clean price and the accrued interest.

What is bond?

What is sukuk?

How do bonds work?

What is the bond notional and interest payments called?

A bond’s notional value, is known as its ‘par value’ which is typically 100. Its interest payment is known as its ‘coupon’.

What are the clean price and dirty price of a bond?

The clean price refers to the bond’s price excluding accrued interest. In contrast, the dirty price includes both the clean price and the accrued interest.

What are bond ratings?

Bond ratings indicate the creditworthiness of a bond and its issuer. They help investors evaluate the associated risk: the higher the rating, the lower the risk, and vice versa. Ratings from AAA to BBB- are classified as investment grade, while those below BBB- are categorized as high-yield bonds. These ratings are typically assigned by three independent agencies: S&P, Moody’s, and Fitch.

What does payment rank mean in bonds?

Payment rank in bonds refers to the order of priority in which bondholders are paid if the issuer faces financial distress or defaults. Bonds with a higher rank, such as secured or senior bonds, are paid before lower-ranked bonds, like subordinated or junior subordinated bonds.

What are the risks associated with Bonds?

Like any other investment product, this product is linked to market performance hence it is not capital-guaranteed and will be associated with some risks. These risks include and are not limited to investment risks, issuer risk/default risk, interest rate risk, market risk, sale prior to maturity, lack of liquidity and secondary market trading, currency risk and embedded options. Please refer to the end of the document for a brief explanation of some of the risks.

What is a Fractional Bond?

Fractional Bond means buying a small, nominal quantity of the underlying bond than the standard market minimums. Fractional Bonds are exclusively offered to all our Emirates NBD customers.

How is a bond different than a Fractional Bond?

The main difference between both bonds is the ticket size. Mostly, the minimum notional ticket size of a normal bond starts from $200,000 while the minimum notional size of a Fractional Bond is $25,000. Also, since this is exclusive to Emirates NBD only, this product will not be available in the market.

What is the minimum trading amount to invest for fractional bonds?

The minimum trading (also referred as notional) amount is set at USD 25,000 and multiples.

What are the bonds available to invest in as Fractional Bonds?

For the list of Bonds available to trade visit the ENBD X application and navigate to the Bonds section in Markets tab of Wealth. Here you can also filter for Fractional Bonds.

How to invest in Fractional Bonds?

You must be registered on ENBD X Mobile Banking app.

Are Fractional Bonds available through Mobile or Online Banking platforms?

Yes. Fractional Bonds are available on ENBD X and for Private Banking customers, can also be purchased through our Wealth Advisors team.

How are the coupons distributed for fractional bonds?

When Emirates NBD receives the economics (coupons, principal repayments or other forms of compensation) of an underlying bond, these are paid pro rata basis the holding in the respective bond.

Is there a lock in period for Fractional Bonds?

Bonds do not have a lock in period, they can be bought and sold anytime as long as liquidity is available.

Can Fractional Bonds be leveraged?

No. Emirates NBD does not offer leverage on Fractional Bond.

Are Fractional Bonds available in the market?

Fractional Bonds are sold exclusively with ENBD. Both Regular and Fractional Bonds are available to be bought and sold via ENBD X application.

Can Fractional Bonds be transferred out of Emirates NBD?

No. Fractional Bonds are exclusively available to Emirates NBD customers only, they cannot be transferred out.

What are the fees associated with this product?

We have 2 fees associated with this product, custody fees and transactional fees which are subject to change at the bank’s own discretion. For customer pricing, please click here.

The main risk factors are summarized below for your information

You should understand the nature of the risks associated with each and every circumstance outlined below and should obtain relevant and specific professional advice before making any decision. The list below does not, however, claim to be a complete list of all related risks. You should assume all risk associated with any decision you make and you shall have no right against Emirates NBD in connection with such decision.

Risk / default risk

The value of the security may decline for a number of reasons which directly relate to the issuer, including, but not limited to, the issuer’s credit worthiness. In addition, there is a risk that the Security Issuer will be unable to pay the contractual interest on the security and/or its principal, in a timely manner, or at all. Emirates NBD does not guarantee or warrant any obligations of the Security Issuer to pay the principal amount of the security, or any contractual interests accrued thereon.

Interest rate risk

Market interest rates are a function of several factors such as the demand for, and supply of, money in the economy, the inflation rate, the stage that the business cycle is in, as well as the government's monetary and fiscal policies. Should the market interest rate rise from the date of the security’s purchase, the security’s price will fall accordingly. The security will then trade at a discount to the purchase price.

Market risk

Market movement, which can be influenced by many factors, including, but not limited to, issuer risk, interest rate risk, market sentiment and changes in economic, financial or political environments may result in the fluctuation of prices. Market risk results from the unpredictability of market movements and is inherent in any investment; such risk may cause the value of the investment to fall rapidly, as well as rise, and you may not get back the amount originally invested.

Sale prior to maturity

Where a security is capital protected, the stated level of capital protection only applies at maturity. The sale of the security prior to the stated maturity date may result in you receiving an amount less than that originally invested at inception. The sale price would be a function of fees, and prevailing market conditions.

Lack of liquidity and secondary market trading

Lack of liquidity may result in difficulty finding a price to sell an investment you have made. In the case of company bankruptcy, suspension of trading, takeover rumors, or flights of capital from a country in crisis, this may mean it is impossible to find any price to close out your position. This could lead to substantial losses up to the value of the investment. No assurance can be given that any trading market for the securities will exist or whether any such market will be liquid or illiquid. If the Securities are not traded on any exchange, pricing information may be more difficult to obtain, and the liquidity and price of the Securities may be adversely affected.

Currency risk

Changes in exchange rates between currencies or the conversion from one currency to another may cause the value of the investment to diminish or increase. Currency exchange rates may fluctuate significantly over short periods of time. Earnings on investment in foreign currencies are dependent on the prevailing foreign exchange rates. Adverse exchange rate movements may erase interest earnings completely or cause a loss of principal relative to your home currency. Investments in assets denominated in a foreign currency are subject to the risk of movements in that currency's exchange rate. The exchange-rate risk on investments in foreign-currency denominated assets applies not only to investments returnable in these foreign currencies, but also to the assets denominated in the foreign currencies and traded in the domestic currency, since their price development usually tracks changes in the exchange rate of the currency in which they are denominated.

Embedded options

The investment may comprise embedded options such as a callable option, a cap on the coupon of a floating rate bond, an option to switch fixed to floating coupon and vice versa, etc. Please refer to the Issuer’s Prospectus for details. Action by the issuer on the back of an embedded option will impact your expected pay-off from the investment. For example, a Callable Bond has call provisions, which allows the bond issuer to buy back the bond from the bondholders and retire the issue at a predetermined price. This is usually done when interest rates have fallen substantially since the issue date. Call provisions allow the issuer to retire the old high coupon bonds in a bid to lower debt costs. Under these circumstances you will be forced to give up a high yielding security, with an adverse effect on the anticipated return.

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