Bonds: Most Popular Articles
These articles are the most popular over the last month.
Understanding Yield Curves
A yield curve is a simple representation of the relationship between the interest rate that a bond pays and when that bond matures. Learning how to read a yield curve -- and knowing the significance of a flattening or inverted yield curve as well as how to calculate the spread -- is a crucial skill for fixed-income investors.
A yield curve is a simple representation of the relationship between the interest rate that a bond pays and when that bond matures. Learning how to read a yield curve -- and knowing the significance of a flattening or inverted yield curve as well as how to calculate the spread -- is a crucial skill for fixed-income investors.
Credit Default Swaps
Credit default swaps are a form of derivative. The swaps are complex investment vehicles that can be used to protect a bond buyer from the risk of default.
Credit default swaps are a form of derivative. The swaps are complex investment vehicles that can be used to protect a bond buyer from the risk of default.
What is a bond?
Bonds are a mystery to many investors. But there's no need for confusion. Once you get past the jargon of yield curves, maturities and Aaa ratings, you'll find a simple and familiar concept. A bond, after all, is nothing more than a loan.
Bonds are a mystery to many investors. But there's no need for confusion. Once you get past the jargon of yield curves, maturities and Aaa ratings, you'll find a simple and familiar concept. A bond, after all, is nothing more than a loan.
What Is the Safest Investment?
If you're primary goal in investing is to not lose money, consider buying U.S. government debt. Treasuries are backed by the "the full faith and credit" of the federal government. But don't be misled. There are risks in all investments -- even in treasuries.
If you're primary goal in investing is to not lose money, consider buying U.S. government debt. Treasuries are backed by the "the full faith and credit" of the federal government. But don't be misled. There are risks in all investments -- even in treasuries.
Buying Corporate Bonds
Buying individual corporate bonds is a complex endeavor. It takes more sophistication and more research than buying a share of stock. Here are some of the key things to consider.
Buying individual corporate bonds is a complex endeavor. It takes more sophistication and more research than buying a share of stock. Here are some of the key things to consider.
Credit Rating Agencies
A bond is a loan. So the first question to ask before you buy a bond is the same question you'd ask before you loaned money to your brother-in-law: "Will I get my money back?" In bonds, there's an entire industry dedicated to answering that question. Welcome to the world of Wall Street's credit-rating agencies.
A bond is a loan. So the first question to ask before you buy a bond is the same question you'd ask before you loaned money to your brother-in-law: "Will I get my money back?" In bonds, there's an entire industry dedicated to answering that question. Welcome to the world of Wall Street's credit-rating agencies.
Working as a Bond Quant
The newest job in the bond world is drawing recruits from the world of mathematics and physics. These numbers- and computer-focused folks are called quants, and they practice the art and science of quantitative analysis.
The newest job in the bond world is drawing recruits from the world of mathematics and physics. These numbers- and computer-focused folks are called quants, and they practice the art and science of quantitative analysis.
Junk Bonds
Junk bonds, also called high-yield and below-investment-grade securities, are among the riskiest investments in the credit market. But because of that risk, bond issuers must pay higher yields to attract investors.
Junk bonds, also called high-yield and below-investment-grade securities, are among the riskiest investments in the credit market. But because of that risk, bond issuers must pay higher yields to attract investors.
Should I Buy Muni Bonds?
For many investors, the idea of earning tax-free returns makes the purchase of a muni bond seem like a no-brainer. But munis aren't for everyone. Unless you're in the right tax bracket, owning a muni can be a very bad move. So let's answer the question: Should you buy municipal bonds?
For many investors, the idea of earning tax-free returns makes the purchase of a muni bond seem like a no-brainer. But munis aren't for everyone. Unless you're in the right tax bracket, owning a muni can be a very bad move. So let's answer the question: Should you buy municipal bonds?
Risks of Bond Investing
Bonds are among the safest investments in the world. But no investment is entirely risk free. In fact, fixed-income investing has its own particular forms of risk, including inflation risk, reinvestment risk, default risk and downgrade risk.
Bonds are among the safest investments in the world. But no investment is entirely risk free. In fact, fixed-income investing has its own particular forms of risk, including inflation risk, reinvestment risk, default risk and downgrade risk.
Face Value
In bonds, face value refers to what is owed to a bondholder when the security matures. By tradition, most bonds in the U.S. have a face value of $1,000.
In bonds, face value refers to what is owed to a bondholder when the security matures. By tradition, most bonds in the U.S. have a face value of $1,000.
10 Things to Know About Bonds
If you’re new to the world of bonds, it’s easy to be intimidated. Bond investing can be filled with unusual lingo, strange concepts and a lot more talk about math and economics than you’ll find at the local discount stock broker’s office. But don’t be discouraged. Bonds aren’t as mysterious as they may appear.
If you’re new to the world of bonds, it’s easy to be intimidated. Bond investing can be filled with unusual lingo, strange concepts and a lot more talk about math and economics than you’ll find at the local discount stock broker’s office. But don’t be discouraged. Bonds aren’t as mysterious as they may appear.
CDOs and theCredit Crisis
Somewhere in early 2007, one of the more complex and controversial corners of the bond world began to unravel. By March of that year, losses in the collateralized debt obligations (CDOs) market were spreading -- crushing high-risk hedge funds and spreading fear through the fixed-income world. The credit crisis had begun.
Somewhere in early 2007, one of the more complex and controversial corners of the bond world began to unravel. By March of that year, losses in the collateralized debt obligations (CDOs) market were spreading -- crushing high-risk hedge funds and spreading fear through the fixed-income world. The credit crisis had begun.
I Bonds
I Bonds are a form of U.S. Savings Bond sold by the U.S. Treasury Department. The primary difference between I Bonds and the older EE Savings Bond is that I Bonds are adjusted for inflation.
I Bonds are a form of U.S. Savings Bond sold by the U.S. Treasury Department. The primary difference between I Bonds and the older EE Savings Bond is that I Bonds are adjusted for inflation.
Zero-Coupon Bonds
Zero-Coupon Bonds are sold at a deep discount to their face value. In many cases, interest is compounded and paid at maturity rather than during the life of the bond. In other cases, a financial institution "strips" the interest payment from a fixed-income investment and resells it as a zero coupon.
Zero-Coupon Bonds are sold at a deep discount to their face value. In many cases, interest is compounded and paid at maturity rather than during the life of the bond. In other cases, a financial institution "strips" the interest payment from a fixed-income investment and resells it as a zero coupon.
Buying a Bowie Bond
Back in 1997, an investment banker named David Pullman created a series of bonds backed by the royalties on music owned by rock star David Bowie. The deal captured the imagination of Wall Street, which has since issued dozens of other bonds that "securitize" intellectual property. The deal also left thousands of fans wondering: Where can I buy a Bowie Bond?
Back in 1997, an investment banker named David Pullman created a series of bonds backed by the royalties on music owned by rock star David Bowie. The deal captured the imagination of Wall Street, which has since issued dozens of other bonds that "securitize" intellectual property. The deal also left thousands of fans wondering: Where can I buy a Bowie Bond?
Muni Bond Funds
If taxes are a concern, but you don't have at least $100,000 to invest, you should consider buying a municipal bond fund. These mutual funds offer the same tax-free advantages of municipal bonds while also offering diversification.
If taxes are a concern, but you don't have at least $100,000 to invest, you should consider buying a municipal bond fund. These mutual funds offer the same tax-free advantages of municipal bonds while also offering diversification.
Career as a Bond Trader
Careers in bond trading can be enormously rewarding from a financial perspective. Competition for these jobs at the giant investment banks and other financial institutions is fierce. And the markets modernize, the floor traders of old are being replaced by a new breed of trader skilled in math and computer programming.
Careers in bond trading can be enormously rewarding from a financial perspective. Competition for these jobs at the giant investment banks and other financial institutions is fierce. And the markets modernize, the floor traders of old are being replaced by a new breed of trader skilled in math and computer programming.
Before You Buy a Bond Fund
Bonds are among the safest investments available. And as a general rule, mutual funds are the safest way to invest in bonds. But that doesn't mean you should jump right in. Here are a few items to consider before you buy a bond fund.
Bonds are among the safest investments available. And as a general rule, mutual funds are the safest way to invest in bonds. But that doesn't mean you should jump right in. Here are a few items to consider before you buy a bond fund.
Auction Rate Securities
Auction rate securites (ARS) are bonds in which the interest rate is reset on a recurring basis -- sometimes as often as every seven days. Both corporate bonds and municipal debt issues are available in ARS form. However, the minimum amount needed to purchase an ARS is generally around $25,000. As a result the ARS market -- which largely collapsed in early 2008 -- is limited to institutional investors and the wealthy.
Auction rate securites (ARS) are bonds in which the interest rate is reset on a recurring basis -- sometimes as often as every seven days. Both corporate bonds and municipal debt issues are available in ARS form. However, the minimum amount needed to purchase an ARS is generally around $25,000. As a result the ARS market -- which largely collapsed in early 2008 -- is limited to institutional investors and the wealthy.
TIPS to Fight Inflation
Inflation can eat away at your investments. But there's a very safe investment from the U.S. Treasury Department that protects investors from inflation risk. The principal invested in TIPS, or Treasury Inflation-Protected Securities, is adjusted semiannually to reflect rises in the Consumer Price Index.
Inflation can eat away at your investments. But there's a very safe investment from the U.S. Treasury Department that protects investors from inflation risk. The principal invested in TIPS, or Treasury Inflation-Protected Securities, is adjusted semiannually to reflect rises in the Consumer Price Index.
Money Market Funds
Money market funds are a popular and safe place for investors to keep cash for the short term. These investment vehicles offer both security and liquidity. But the relatively poor returns offered by this class of mutual funds make them ill-suited for long-term investment.
Money market funds are a popular and safe place for investors to keep cash for the short term. These investment vehicles offer both security and liquidity. But the relatively poor returns offered by this class of mutual funds make them ill-suited for long-term investment.
Callable Bonds
Some bonds have an unusual feature that allows the issuer to "call" back the bond and pay off the principal early. That poses some additional risk to investors in the debt market. But there are also some additional rewards available to buyers of callable bonds.
Some bonds have an unusual feature that allows the issuer to "call" back the bond and pay off the principal early. That poses some additional risk to investors in the debt market. But there are also some additional rewards available to buyers of callable bonds.
"Dirt" Bonds
"Dirt" bonds are the nickname given to tax-free municipal bonds used to finance real-estate development projects.
"Dirt" bonds are the nickname given to tax-free municipal bonds used to finance real-estate development projects.
Underwriters
Selling bonds is a complex endeavor. There are millions and millions of dollars at stake even in the smallest of offerings. Investment banks are key to the process. Those banks bid for the right to serve an intermediary between the bond issuer and the buying public. That intermediate role is called "underwriting."
Selling bonds is a complex endeavor. There are millions and millions of dollars at stake even in the smallest of offerings. Investment banks are key to the process. Those banks bid for the right to serve an intermediary between the bond issuer and the buying public. That intermediate role is called "underwriting."
EE Savings Bond
An EE Savings Bond, available in both paper and electronic versions, is an investment vehicle sold by the U.S. Treasury Department. It's a popular choice among small investors and newcomers to the bond market.
An EE Savings Bond, available in both paper and electronic versions, is an investment vehicle sold by the U.S. Treasury Department. It's a popular choice among small investors and newcomers to the bond market.
Default Risk
Default risk describes the danger that a bond issuer will become insolvent and unable to honor its debt obligations. In the bond world, default risk is highest for below-investment-grade securities known as junk bonds. Default risk is lowest for government-backed securities.
Default risk describes the danger that a bond issuer will become insolvent and unable to honor its debt obligations. In the bond world, default risk is highest for below-investment-grade securities known as junk bonds. Default risk is lowest for government-backed securities.
Opportunity Cost
Opportunity cost is a form of investment risk that measures what is lost when an investor must make a choice among alternatives. For example, by keeping money in a savings account rather than buying a corporate bond, the opportunity cost is the difference between the two investments -- the money that could have been made, but wasn't.
Opportunity cost is a form of investment risk that measures what is lost when an investor must make a choice among alternatives. For example, by keeping money in a savings account rather than buying a corporate bond, the opportunity cost is the difference between the two investments -- the money that could have been made, but wasn't.