How To Read Bond Charts and Monthly Bond Yield Charts | Finance
By: Giulio Rocca
If you are planning to invest in the bond market, you should learn how to interpret key statistics, called “bond tables” based on their tabular format. This information is easily found from many sources, including financial dailies such as the “Wall Street Journal”, “The Financial Times” and “Investor’s Business Daily”. You can get real-time data by visiting the websites of these publications or connecting to financial news channels such as CNBC or Bloomberg News.
Issuers and types of bonds
Bonds are a type of long-term debt issued by corporations as well as federal, state and local governments. The financial media typically organize bond market data by bond type, such as US Treasuries, Municipalities, Corporations, Mortgage Backed Securities, and International Debt. Additionally, bond tables can identify specific bond issuers. For example, the corporate bond section at the end of a newspaper might list Microsoft and General Electric as issuers. The name of the issuer can sometimes be represented by its ticker symbol, such as MSFT for Microsoft or GE for General Electric.
Maturities and coupons
The bond tables will show the maturity of a bond or the date on which the issuer is contractually obligated to repay the principal of the debt. Bonds with prepayment characteristics, such as callable bonds, are often marked with their prepayment date. In addition, bond tables will include a bond’s coupon or the interest rate as a percentage of the bond’s face value. For example, a bond with a face value of $ 1,000 and a coupon of 6% would pay $ 6 interest per year, regardless of the bond’s trading price.
Bid and ask price
Bond prices are divided into two components: supply, or the price buyers are willing to pay, and demand, or the price at which sellers are willing to sell. US Treasuries are shown as whole numbers and fractions of 32nds separated by a colon. For example, a 10-year Treasury with an offer of 105: 6 means buyers are willing to pay 105 and 6/32, or $ 105.1875. Other types of bonds have bid and ask prices slightly differently; municipalities, for example, display bonds as whole numbers and fractions of eight, such as 102 1/8.
Yield to maturity and yield to worst
The yield of a bond provides a more accurate measure of the yield relative to its coupon. Bond tables will include a bond’s yield to maturity, or how much investors will earn from their investment at current market prices. Bonds that trade below par, or $ 100, have a higher yield to maturity than their coupon, while the reverse is true for bonds that trade below par. For example, a bond with a coupon of 12.5% ââcan have a yield of 13.5% if it is trading at 98 1/8. Bonds with prepayment characteristics may also be associated with worst-case return, or return in the event that the issuer calls the bond.
Biography of the writer
Giulio Rocca’s experience is in investment banking and management consulting, including advising Fortune 500 companies on mergers and acquisitions and corporate strategy. He also founded GradSchoolHeaven.com, an online resource for graduate applicants. He holds a BS in Economics from the University of Pennsylvania, an MA in English from the University of Hawaii at Manoa, and an MBA from Harvard University.