Bond Trading for Beginniners

Bond Trading

Bonds are securities that can be readily bought and sold. A large number of bonds trade on both the New York Exchange and the American Exchange. A bond issue consists of a number of bonds, usually in denominations of $1,000 or $5,000, and is sold to many different lenders. After bonds are issued, they often are bought and sold by investors, meaning that any particular bond probably has a number of owners before it matures. Since bonds are exchanged (bought and sold) in the market, they have a market value (price). For convenience, bond market values are expressed as a percent of their par (face) value. For example, a company’s bonds might be trading at 103½, meaning they can be bought or sold for 103.5% of their par value. Bonds can also trade below par value. For instance, if a company’s bonds are trading at 95, they can be bought or sold at 95% of their par value.

Decision Insight

Quotes The IBM bond quote here is interpreted (left to right) as Bonds, issuer name; Rate, contract interest rate (7%); Mat, matures in year 2025 when principal is paid; Yld, yield rate (5.9%) of bond at current price; Vol, daily dollar worth ($130,000) of trades (in 1,000s); Close, closing price (119.25) for the day as percentage of par value; Chg, change (+1.25) in closing price from prior day’s close. ▪