Those who have fixed income investments have certainly been surprised by a statement issued by their broker showing that the current value of the asset is different from its initial application. This is mark-to-market, but what does it have to do with tokenization?
Before talking about this relationship, it is important to keep two thoughts in mind:
- There is no reason to worry about your ongoing fixed income investments;
- Fair value accounting (as it is also known), brings benefits to your analyses and to the way you manage your investment portfolio.
As of January 2023, banks and investment brokers are required to mark-to-market their clients’ fixed income positions, assigning the daily value of each.
The goal with this feature is to convey more efficiency and reliability to investors and to offer one more form of analysis to manage asset portfolios in a fast and effective way.
But did you know that it also changed your view on fixed income investments?
BLOCKBR, a web 3.0 native company, will tell you all about mark-to-market and how it helps diversify your investments!
WHAT IS MARK-TO-MARKET
Mark-to-market is basically a price adjustment mechanism for fixed income investment assets one owns that is independent of their original values.
In a simple example, it is like knowing the market value of a property, when you paid more or less for it 2 years ago. You can use this information to understand whether it is time to sell the property or not.
With fixed income securities, the same thing happens: it is a daily pricing of a financial asset that can be used as a parameter by those who own the same product.
The assets that fall under this rule are:
- Federal government bonds;
- Debentures;
- CRI and CRA.
On the other hand, it does not apply to bank certificates of deposit(CDB), agribusiness letters of credit (LCA), and real estate letters of credit (LCI).
FIDC Tokenization: Digitalization of assets in the credit market!
WHEN DOES MARK-TO-MARKET IMPACT REDEMPTIONS?
This is a fundamental aspect for the efficient use of fair value accounting: when (and if) the methodology impacts the already contracted values of fixed income investments.
- The mark-to-market is always a market reference value for the investor to analyze the valuation of the assets;
- It will objectively impact early redeemed securities, because they will then be subject to current market value;
- For investments redeemed at the end of the period, the conditions agreed upon in the contract will always apply.
Therefore, the practical impact occurs when the investor sells the paper before maturity and the interest practiced at the contracting and those in effect at the sale, which reflect in the mark-to-market, will make all the difference in the final profitability.
If you intend to hold on to the paper until maturity, there is no reason to worry.
As we can see, fair value accounting provides a guide for investors to understand all market fluctuations and use this data to evaluate the asset mix of the investment basket.
HOW MARK-TO-MARKET AFFECTS INVESTMENTS
ASSET TRANSPARENCY
The visibility of the values allows investors to perceive the oscillations and to identify selling and buying opportunities before the securities mature, diversifying their investment portfolios more accurately.
PORTFOLIO WITH MORE PREDICTABILITY
The reference values of each of the financial assets that are in your product basket help you to make decisions without scares, because the valuation of the securities is always available. This even contributes to adding new products such as security tokens.
STRENGTHENING OF THE SECONDARY MARKET
As with receivables tokens, sales of fixed income assets must be made in the secondary market, directly between investors – the primary market exists only for the issuer‘s offering of the asset.
Marking to market encourages the negotiation of a wider variety of securities, based on values marked to market, which helps to increase the volume of transactions and the credibility of the secondary market.
BOND VOLATILITY
This is a scenario we do not know in the fixed income market, with products characterized by stability in results and, for this reason, are preferred by conservative investors.
However, with the greater market visibility given by fair value accounting, there tends to be volatility in funds and fixed income securities. This novelty can make many people feel insecure about investing.
Asset and rights tokenization is a great way to diversify investments with stability!
WHY START DIVERSIFYING YOUR INVESTMENTS
Mark-to-market can also be an important mechanism to show that the traditional market is somehow stagnating in options and yields or to signal that fixed income securities will become more volatile.
This is a good time to look for alternatives, such as diversifying investments with tokens, for example.
The tokenization of businesses and assets is being used by an increasing number of companies to trade goods and rights through tokens, generating benefits for both the providers and the investors.
- More liquidity: provider and investor can transact without the traditional intermediaries (banks, brokers);
- Lower cost: there are no fees charged by financial intermediaries;
- More security: everything is done in an encrypted and 100% electronic way, without human intervention, inside a blockchain and with a smart contract;
You can find various financial products, assets and business projects with the prospect of great returns and start investing in tokens with 50 reals!
RECEIVABLES TOKENS ARE THE HIGHLIGHT FOR 2023
Receivables anticipation tokens are an excellent way to:
- Generate passive income;
- Get better pay;
- Investing without volatility;
- Opt for short deadlines.
These tokens are like loans, offered by companies that want to raise funds for their activities and pay interest or a discount over a predetermined period – these conditions are part of the smart contract of the offering.
Since the goal of capitalizing the operation is common to all companies, a large growth in the supply of receivables tokens is expected.
Learn more advantages of investing in tokens!
START INVESTING IN TOKENS WITH BLOCKBR!
Buying receivables tokens, tradable asset tokens, product tokens, or project tokens is simple. You just need to open an account with BLOCKBR.
Then go to our token marketplace and browse the various options. Some will meet your expectations for earnings and operation security.
Come to BLOCKBR and become a token investor!
BLOCKBR Digital Assets is a web 3.0 native fintech that unites technological innovation and digital knowledge to transform physical assets into digital ones, in the process of tokenization.
The supply of tokenized assets is democratic and decentralized, which makes the way of investing safe, simpler and more efficient.
We enable, structure, issue and offer tokens on our platform and beyond. Be aware that tokens depend on feasibility and regulatory factors.
Do you want to tokenize your business or part of it? Do you have a business solution and does it make sense to issue your own token ?
