Are corporate bonds better than government bonds?

Corporate Bonds. ... The most important difference between corporate

bonds and government bonds is their risk profile. Corporate bonds usually offer a
higher yield than government bonds because their credit risk is generally greater.

Why are government bonds safer than corporate bonds?

Similar debt instruments issued by the government are referred to as
gilts. Corporate bonds carry a higher credit risk compared to gilts and offer higher
yields. Usually, lower the credit worthiness of a corporate bond, higher will be its
yield offering.Feb 

\Treasury bonds pay a stable interest rate at a semi-annual frequency during the 30-year
term. Some corporate bonds also reward investors with interest payments. ...
While corporate bonds are riskier than treasury bonds, they have the potential to perform
better than treasury bonds due to higher interest rates.

What is the difference between Treasury bonds and corporate bonds?

Corporate Bonds vs.
While corporate bonds all have some level of default risk (no matter how small),
U.S. Treasury bonds are used as a benchmark by the market because they have
no default risk. Therefore, corporate bonds always earn a higher interest rate
than Treasury bonds.

Similar debt instruments issued by the government are referred to as gilts. Corporate

bonds carry a higher credit risk compared to gilts and offer higher yields. Usually, lower the
credit worthiness of a corporate bond, higher will be its yield offering.
What is Treasury bonds in the Philippines?
Retail Treasury Bonds (RTBs) are medium to long-term investments issued by
the Philippine government. They form part of the Government's program to make
securities available to small investors. Whether you're an individual or a corporation,
RTBs allow you to invest and grow your money with very low risk of losing.

Treasury Bond (T-Bond)

By JAMES CHEN
 Updated Aug 20, 2019
What Is a Treasury Bond?
A Treasury bond (T-bond) is a government debt security that earns interest
until maturity, at which point the owner is also paid a par amount equal to the
principal. Treasury bonds are part of the larger category of government bonds,
a type of bond issued by a national government with a commitment to pay
period interest payments known as coupon payments as well as the principal
upon maturity. Treasury bonds are marketable, fixed-interest U.S.
government debt securities with a maturity of more than 10 years. As is true
for other government bonds, Treasury bonds make interest payments
semiannually, and the income received is only taxed at the federal level. T-
bonds are known in the market as primarily risk-free; they are issued by the
U.S. government with very little risk of default. 

Municipal bonds (munis) are issued by state, county,

and local municipalities to fund government work, such
as road maintenance and other building projects.

Municipal Bonds vs. Taxable Bonds and CDs

To determine whether municipal bonds are a better investment than taxable bonds or CDs, investors
should look at the tax-equivalent yield.

Corporate Bonds
Corporate bonds are debt securities issued by
corporations and bought by investors. They usually have
higher interest rates than government bonds and are
backed by the payment ability of the company.

U.S. Corporate Bonds: The Last Safe Place to Make Money

There aren't many other sources right 

Retail Treasury Bonds

(RTBs)
Low risk, fixed term investments issued by the Philippine
Government to help you invest in a better future.
This offer has ended.
 Overview
Retail Treasury Bonds (RTBs) are medium to long-term investments issued by the Philippine
government. They form part of the Government’s program to make securities available to small
investors.

Whether you’re an individual or a corporation, RTBs allow you to invest and grow your money
with very low risk of losing. It’s considered a fixed income security, which means that you earn a
fixed interest rate based on the principal market given on a quarterly basis.

This is for investors looking for:

 A low-risk investment
 An accessible investment
 A higher-yielding investment

For more information about Retail Treasury Bonds, visit Bureau of Treasury‘s website.

Terms of Offering
Issuer Philippine Government through the Bureau of the
Treasury (BTr)

Maturity Date February 11, 2023

Issue & Redemption At par (or 100%)

Price

Interest Rate 4.375% (subject to 20% final withholding tax except

for tax-exempt institutions)

Interest Payments Quarterly

Minimum Minimum of PhP5,000.00 and in integral multiples

Investment of PhP5,000.00

Note: The Republic, through the BTr, reserves the right to revise the timetable You will be
advised accordingly of any change in the timetable.
 Why Invest in Retail Treasury Bonds?


Low-Risk Investment

Retail Treasury Bonds are direct and unconditional obligations of the Republic of the Philippines.


Quarterly Interest Income

They offer fixed quarterly interest income compared to other financial instruments.


Liquid

They can easily be bought or sold in the secondary market through PDEX accredited brokers like
Security Bank.

About RTBs
1. What are Retail Treasury Bonds (RTBs)? The RTBs are part of the government’s
savings mobilization program designed to make government securities available to retail
investors, hence, the name Retail Treasury Bonds. They are issued by the Republic of the
Philippines through the Bureau of the Treasury (BTr). This issue of the RTBs will have a
maturity of 5 years. Interest will be paid quarterly compared to the regular Treasury Bonds
which are paid semi-annually.
2. Why invest in RTBs? The RTBs are designed to be a low-risk, higher yielding and
affordable savings instrument. They are considered credit risk-free /default free because they
are direct, unconditional and general obligations of the Republic of the Philippines. RTBs are
higher-yielding, as their interest rates are superior to other investments. RTBs are affordable.
The minimum denomination is only PHP 5,000 and in multiples of PHP 5,000 thereafter.

How to Invest in RTBs

 
1. Who can purchase the RTBs? The RTBs aim to cater to retail investors such as
individuals and corporations who are looking for a low-risk, accessible and higher-yielding
investment for their savings.
2. When and where can an investor purchase RTBs? The RTBs will be sold to the public
during the Offer Period which is scheduled from Feb 26, 2019 – March 8, 2019. This is the
designated period given to the public to subscribe to the RTBs through the Issue Managers
and the other Selling Agents. Since only a limited amount of RTBs will be issued, the BTr has
the option to shorten the Offer Period. The terms and conditions applicable to the RTBs as
well as copies of the complete documentation will be made available by each of the Issue
Managers and Selling Agents during the Public Offer Period. After the Public Offer Period
investors may still purchase the RTBs in the secondary market at prevailing market rates.
3. How does an investor participate in the offer period? Investors may purchase the
RTBs over the counter from the Selling Agents, subject to the documentary and minimum
investment requirements of each Selling Agent. Payment procedures for investments in RTBs
may vary per Selling Agent. Investors will be required to open a peso deposit account or
designate an existing peso account where interest and principal payments of the RTBs will be
credited.

Ownership of RTBs
 

1. What are the risks involved in investing in RTBs? The RTBs are considered having
the lowest creditrisk because they represent the direct and unconditional obligation of the
government, thereby enjoying the highest certainty of payment. The yield is assured if the
investor holds on to the bond until maturity, otherwise it will be subject to interest rate risk
depending on the prevailing market rate at the time the RTBs are sold in the secondary
market.
2. What is an investor’s proof of ownership? The Selling Agents will sell the RTBs to
individuals and other investors on a non-recourse basis, documented through confirmation of
outright sale (COS) / confirmation advise issued by the Selling Agents in favor of the investor.
Investors may pick up this Confirmation of Sale a few days after the close of the Public Offer
period from the offices of the Selling Agents. No certificate will be issued to investors, as their
ownership will be registered electronically under the BTr’s National Registry of Scripless
Securities (NRoSS).
3. Can an investor sell his RTBs after the Issue Date? RTBs are considered marketable
securities and have been traded in the secondary market. The Selling Agents from whom the
RTBs were purchased may assist the investor, on a best-efforts basis, in selling the RTBs in
the secondary market at prevailing market rates. At the time of sale, the RTBs may trade at a
premium or discount to face value.
4. Are RTBs tax-free? Interest income on RTBs is subject to the 20% final withholding tax.
Only tax-exempt institutions, duly-certified as such by the Bureau of Internal Revenue, are
exempt from payment of the 20% final withholding tax.
Ownership of RTBs
 

1. What are the risks involved in investing in RTBs? The RTBs are considered having
the lowest creditrisk because they represent the direct and unconditional obligation of the
government, thereby enjoying the highest certainty of payment. The yield is assured if the
investor holds on to the bond until maturity, otherwise it will be subject to interest rate risk
depending on the prevailing market rate at the time the RTBs are sold in the secondary
market.
2. What is an investor’s proof of ownership? The Selling Agents will sell the RTBs to
individuals and other investors on a non-recourse basis, documented through confirmation of
outright sale (COS) / confirmation advise issued by the Selling Agents in favor of the investor.
Investors may pick up this Confirmation of Sale a few days after the close of the Public Offer
period from the offices of the Selling Agents. No certificate will be issued to investors, as their
ownership will be registered electronically under the BTr’s National Registry of Scripless
Securities (NRoSS).
3. Can an investor sell his RTBs after the Issue Date? RTBs are considered marketable
securities and have been traded in the secondary market. The Selling Agents from whom the
RTBs were purchased may assist the investor, on a best-efforts basis, in selling the RTBs in
the secondary market at prevailing market rates. At the time of sale, the RTBs may trade at a
premium or discount to face value.
4. Are RTBs tax-free? Interest income on RTBs is subject to the 20% final withholding tax.
Only tax-exempt institutions, duly-certified as such by the Bureau of Internal Revenue, are
exempt from payment of the 20% final withholding tax.
Offer FAQs
 

1. If I already have an existing account with the bank I want to buy RTBs from, do I
need to open another account specifically for this investment? No, any Peso Account,
even an existing one would do. This is where the interest payments will be credited to.
2. Our client is a tax exempt institution but their certification of exemption is dated
2006. They have a pending request for a certification since last year but BIR has not
issued a new certification yet. Can they submit the 2006 certification to avail of the
RTB? The institution must have to wait for the BIR certification for them to be exempted from
tax prior to availing RTBs.
3. Is my principal investment guaranteed even if I sell before maturity? Depending on
the prevailing market rates during the time of the sell down, there is a possibility that the
proceeds may be lower than the principal investment.
4. Why are there fees involved when the RTBs are traded in the secondary
market? The fees represent payment of the service provided by the brokers and of the fixed
income trading platforms where the RTBs are traded.
5. Are RTBs government guaranteed? No because it the government itself is the issuer
so it cannot guarantee itself but it is a direct liability of the sovereign to the holder so it is a
virtually risk free investment.
6. Can the RTBs be pre-terminated? No, RTBs cannot be pre-terminated. However, they
can be sold through the secondary market.

What bonds are quoted in 32nds?

Corporate bonds are quoted in 1/8th increments while government bonds are
typically quoted in 1/32nds. Municipal bonds may be quoted on a dollar basis or on
a yield-to-maturity basis. Bonds are generally quoted as percentage of face value
($1,000).
Once you know how to read bond quotes, you can easily interpret bond
price tables given in newspapers or websites.

We will take the example of Treasury bond prices, as shown in the table
below:

Rate: The first column shows the rate, i.e., the coupon paid by the bond.
Note that the highlighted bond pays a coupon of 8 7/8%

Maturity Date: The second column shows the maturity of the bond. In the
above table both the bonds mature in Feb 2016.

Bid and Ask Prices: The next two columns show the bid and ask prices. 
Bid price is the maximum price offered for the bond and the ask price is the
minimum price asked for the bond. The highlighted bond can be sold at
100-02 (100+2/32= 100.0625) and purchased at 100-04 (100 + 4/32 =
100.125)

Change: The change just shows the change in price from the previous
close.

Yield: This represents the yield to maturity of the bond, i.e., the internal
rate of return of the bond.

Bond spread (or credit spread) refers to the difference in the yield of
two bonds because of the difference in their credit ratings.
 The credit rating of a bond reflects the risk profile of the bond. For example,
BB-rated corporate bond will be riskier compared to a Treasury security
issued by the Government, which is considered risk free.

In this case the bond spread for this BB-rated security will be the difference
between the yield of the security and that of the Treasury security.

The bond spread reflects how much extra the bond buyer is being
compensated for taking the extra credit risk.

Bid-Ask Spread of Bonds

FIXED INCOME SECURITIES

This lesson is part 5 of 12 in the course Basics of Bonds

When you buy and sell bonds in the secondary market, you do so at a

slightly different prices. The bid price is the price at which the dealer is
willing to buy the bond from you. The ask price the price at which the dealer
sells the bonds to you.

The ask price is always higher than the bid price, and the difference
between the two is called bid-ask spread. This is a type of transaction cost.

The bid-ask spread will generally be smaller for liquid bonds compared to
the illiquid bonds.

Coupon rate structures

 Zero coupon bonds: These are bonds which do not carry any
liability to pay any interest till the date of maturity, but are initially sold at a
much discounted value to the face value on maturity. Say, in case of a
bond with a face value of $1000 issued for a five years period, the same
could also be sold initially at $650, and may carry the status of a zero
 coupon rate till maturity. The value at which it may be initially issued is
usually close to discounted present value of the face value.
 Step up notes: This are bonds in whose case the rate of interest
gradually moves up till the date of maturity for a specified period and for the
later years, is usually paid at a higher rate than the initial years.
 Deferred coupon bonds: In such cases, the coupon payments
accrue, but have to be paid only in the later period till maturity at a
compound rate, after an initial deferral period. Such an interest is usually
paid back to the buyer after initial deferral period in lump sum on the bonds.
For a later half of the period, such bonds carry a normal coupon rate which
is paid back semi-annually.

Impact of Liquidity on Bond Spreads

FIXED INCOME SECURITIES, PRM EXAM, PRM EXAM I

This lesson is part 6 of 12 in the course Basics of Bonds

The various bonds trading in the market can have different liquidity. A

highly liquid bond will trade very frequently, in large volumes, and will have
a very low bid-ask spread. On the other hand a less liquid bond will trade
less frequently and will have higher bid-ask spread.

The liquid Treasury notes/securities are called “On-the-run” securities,

while the illiquid securities are called “Off-the-run” securities.

The yield of “off-the-run” securities will be higher than the “on-the-run”

securities even if they have the same characteristics such as maturity and
credit rating. The additional yield is the risk premium attributed to the
liquidity risk present in the “off-the-run” securities.

What is a Bond Quote

A bond quote is the last price at which a bond traded, expressed as a
percentage of par value and converted to a point scale. Par value is generally
set at 100, representing 100% of a bond's face value of $1,000. For example,
if a corporate bond is quoted at 99, that means it is trading at 99% of face
value. In this case, the cost to buy each bond is $990.
Key Takeaways

 A bond quote refers to the last price at which a bond traded.

 Bond quotes are expressed as a percentage of par (face value) and
converted to a point scale.
 The par value is traditionally set at 100, which represents 100% of a
bond's $1,000 face value of $1,000.
 Bond quotes may also be expressed as fractions.

Yield to Maturity (YTM)

Yield to maturity (YTM) is the total return expected on a bond if the bond is held until
maturity. 

Below Par
By JAMES CHEN

 Updated Oct 2, 2019

What Is Below Par?

Below par is a term describing a bond whose market price is trading below its
face value or principal value, usually $1,000. As bond prices are quoted as a
percentage of face value, a price below par would typically be anything less
than 100.

KEY TAKEAWAYS

 Below par refers to a bond price that is currently below its face value.
 Below par bonds are said to be trading at a discount and the price will
be quoted below 100.
 Bonds trade below par as interest rates rise, as the issuer's credit rating
falls, or when the bond's supply greatly exceeds demand.
Understanding Below Par
A bond can be traded at par, above par, or below par. A bond trading at
par value is simply one that is trading at the face value of the bond’s
certificate. An investor who purchases this bond will be repaid the par value at
maturity, nothing more, nothing less.

A bond with a price above par is called a premium bond. The bond value will
slowly decrease over the life of the bond until it is at par on the maturity date.
The bondholder will receive the par value of the bond when it matures; this
value is less than what the bond was purchased for.
A bond trading below par is the same as a bond trading at a discount. As the
discount bond approaches maturity, its value increases and slowly converges
towards par over its term life. At maturity, the bondholder receives the par
value of the bond; this value is higher than what the bond was purchased for.

For example, a bond has a $1,000 face value printed on its certificate but is
selling in the market for $920. This bond is said to be trading below par.
Although the investor paid $920 to acquire the bond, s/he will receive $1,000
when it matures.

Why Bonds Trade Below Par

A bond may trade below par when interest rates change in the market. Given
that an inverse relationship exists between bond prices and interest rates, if
prevailing interest rates rise in the economy, the value of a bond will decrease.
This is because the coupon rate on the bond is now lower than the market
interest rate.

In other words, investors are receiving less interest income than what they
would receive if they purchase newer issues in the market.

For example, let’s assume a bond was issued at par. The coupon rate on the
bond is 3.5% and the market interest rate is also 3.5%. A couple of months
later, forces in the economy raise the price of interest rates to 4.1%. Since the
coupon rate on the bond is fixed at 3.5%, it is now lower than the interest rate
in the economy. When a bond trades below par, its current yield (coupon
payment divided by market price) is higher than its fixed coupon rate.

A bond may also trade below par if its credit rating is downgraded. This
reduces the confidence level in the issuer’s financial health, causing the value
of the bonds to drop below par. A rating agency downgrades an issuer’s credit
after taking certain factors into consideration, including concerns about the
issuer’s risk of default, deteriorating business conditions, weaker economic
growth, and falling cash balances on the balance sheet, among other things.

When there is an excess supply of a bond, the bond will trade below par. If
interest rates are expected to increase in the future, the bond market may
experience an increase in the number of bonds issued in the current time.
Since bond issuers attempt to borrow funds from investors at the lowest cost
of financing possible, they will increase the supply of these low interest-
bearing bonds, knowing that bonds issued in the future may be financed at a
higher interest rate. The excess supply will, in turn, push down the price for
bonds below par.
Rewards for Bondholders
The rewards available to bondholders include a relatively safe investment
product. They receive regular interest payments and a return of their invested
principal on maturity. Also, in some cases, the interest is not subject to taxes.
However, with its upside bondholding also carries its share of risks.

Pros

 Bondholders can earn a fixed income with regular interest—or coupon

—payments.

 Bondholders have the benefits of a safe, risk-free investment with U.S.

Treasurys.

 In case of company bankruptcy, bondholders receive payment before

common stock shareholders.

 Some municipal bonds provide tax-free interest payments.

Cons

 Bondholders face interest rate risk when market rates are rising.

 Credit risk and default risk can happen to corporate bonds tied to the
issuer's financial viability.
  Bondholders may face inflationary risk if inflation outpaces the coupon
rate of the security they hold.

 When market interest rates outpace the coupon rate, the face value of
the bond on the secondary market may decrease.

Risks for Bondholders

The interest rate paid on a bond might not keep up with inflation. Inflationary
risk is a measure of price increases throughout an economy. If prices rise by
3% and the bond pays a 2% coupon, the bondholder has a net loss in real
terms. In other words, bondholders have inflation risk.

Bondholders also must deal with the potential of interest rate risk. Interest rate
risk occurs when interest rates are rising. Most bonds have fixed-rate
coupons, and as market rates rise, they may end up paying lower rates. As a
result, a bondholder might earn a lower yield compared to the market in the
rising-rate environment.

Being a bondholder is generally perceived as a low-risk endeavor because

bonds guarantee consistent interest payments and the return of principal at
maturity. However, a bond is only as safe as the underlying issuer. Bonds
carry credit risk and default risk since they're tied to the issuer's financial
viability. If a company struggles financially, investors are at risk of default on
the bond. In other words, the bondholder might lose 100% of the principal
invested should the underlying company file bankruptcy.

For example, holding corporate bonds typically yields higher returns than
holding government bonds, but they come with higher risk. This yield
difference is because it is less likely a government or municipality will file for
bankruptcy and leave its bondholders unpaid. Of course, bonds issued by
foreign countries with shakier economies or governments during upheaval can
still carry a far greater risk of default than those issued by financially stable
governments and corporations.

Bond investors must consider the risk-versus-reward of being a bondholder.

Risk causes bond prices on the secondary market to fluctuate and deviate
from the bond's face value. Potential bondholders may not be willing to pay
$1,000 for a bond with a $1,000 face value if it's issued by a new company
with little earnings history, or by a foreign government with an uncertain future.

As a result, the $1,000 bond may only sell for $800 or at a discount. However,
the investor who purchases the bond is taking the risk that the issuer will not
fold or default before the investment's maturity. In return, the bondholder has
the potential of a 25% gain at maturity.

Coupon Interest Rate vs. Yield

For instance, a bond with a $1,000 face value and a 5% coupon rate is going
to pay $50 in interest, even if the bond price climbs to $2,000, or conversely
drops to $500. It is thus crucial to understand the difference between a bond's
coupon interest rate and its yield. The yield represents the effective interest
rate on the bond, determined by the relationship between the coupon rate and
the current price. Coupon rates are fixed, but yields are not.

Another example would be that a $1,000 face value bond has a coupon
interest rate of 5%. No matter what happens to the bond's price, the
bondholder receives $50 that year from the issuer. However, if the bond price
climbs from $1,000 to $1,500, the effective yield on that bond changes from
5% to 3.33%. If the bond price falls to $750, the effective yield is 6.67%.

General interest rates substantially impact stock investments. But this is no

less true with bonds. When the prevailing market rate of interest is higher than
the coupon rate—say there's a 7% interest rate and a bond coupon rate of just
a 5% face value—the price of the bond tends to drop on the open
market because investors don't want to purchase a bond at face value and
receive a 5% yield, when they could source other investments that yield 7%.

This drop in demand depresses the bond price towards an equilibrium 7%

yield, which is roughly $715, in the case of a $1,000 face value bond. At $715,
the bond's yield is competitive.

Higher Coupon Rates

Conversely, a bond with a coupon rate that's higher than the market rate of
interest tends to raise the price. If the general interest rate is 3% but the
coupon is 5%, investors rush to purchase the bond, in order to snag a higher
investment return. This increased demand causes bond prices to rise until the
$1,000 face value bond sells for $1,666.

In reality, bondholders are as concerned with a bond's yield to maturity as they

are with current yield because bonds with shorter maturities tend to have
smaller discounts or premiums.

The credit rating given to bonds also largely influences the price. It's possible
that the bond's price does not accurately reflect the relationship between the
coupon rate and other interest rates.

Because each bond returns its full par value to the bondholder upon maturity,
investors can increase bonds' total yield by purchasing them at a below-par
price, known as a discount. A $1,000 bond purchased for $800 generates
coupon payments each year, but also yields a $200 profit upon maturity,
unlike a bond purchased at par.

Coupon Rate
Coupon rates are largely influenced by the interest rates set by the
government. Therefore, if the government increases the minimum interest rate
to 6%, then any pre-existing bonds with coupon rates below 6% lose value.

Anyone looking to sell pre-existing bonds must reduce their market price to
compensate investors for the bonds' lower coupon payments relative to the
newly issued bonds.

To buy a bond at a premium means to purchase it for more than its par value.
To purchase a bond at a discount means paying less than its par value.
Regardless of the purchase price, coupon payments remain the same.

 
To understand the full measure of a rate of return on a bond, check its yield to
maturity. 
Yield Rate
A bond's yield can be measured in a few different ways. Current yield
compares the coupon rate to the current market price of the bond. Therefore,
if a $1,000 bond with a 6% coupon rate sells for $1,000, then the current yield
is also 6%. However, because the market price of bonds can fluctuate, it may
be possible to purchase this bond for a price that is above or below $1,000.

If this same bond is purchased for $800, then the current yield becomes 7.5%
because the $60 annual coupon payments represent a larger share of the
purchase price.

Special Considerations
A more comprehensive measure of a bond's rate of return is its yield to
maturity. Since it is possible to generate profit or loss by purchasing bonds
below or above par, this yield calculation takes into account the effect of the
purchase price on the total rate of return. If a bond's purchase price is equal to
its par value, then the coupon rate, current yield, and yield to maturity are the
same.

How to read a bond table

This is the way bond ratings are generally displayed in newspapers and specialized publications. Online,
the information is similar but may be displayed differently.
Columns 1: Issuer - This is the company, province (or state), or country that is issuing the bond.

Column 2: Coupon - Fixed interest rate that the issuer pays to the lender.

Column 3: Maturity date - This is the date on which the borrower will pay the investors their principal
back. Typically only the last two digits of the year are quoted, 25 means 2025, 09 is 2009, etc.

Column 4: Bid price - This is the price someone is willing to pay for the bond. It's quoted in relation to 100,
no matter what the par value is. Think of the bid price as a percentage: a bond with a bid of 93 means it's
trading at 93% of its par value.

Column 5: Yield - The yield indicates annual return until the bond matures. Usually, this is the yield to
maturity, not current yield. If the bond is callable, it will have a "c--" where the "--" is the year the bond can
be called. For example "c10" means the bond can be called as early as 2010.
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Home / Bonds / How To Read A Bond Table

How To Read A Bond Table

Bond tables are usually published in financial news publications and are used to compare different bonds. They
will usually include the most basic information, including the issuer of the bond, the coupon payments, the
maturity date, the bid price and the yield. Understanding how to read a bond table properly is crucial to making
wise investment decisions.  Since you would not purchase a car or a home without shopping around for the best
deal, bonds should be compared to other similar assets, but also to different assets such as equities to ensure
that you have found the asset with the optimal level of risk and return.

Column 1-Issuer
The first column in a bond table will usually list the issuer of the bond. This can include not only large
corporations, but also different levels of government.  Investors who tend to be more conservative should only
look at bonds that are issued by the government or highly reputable corporations.  Having said that, the first
column will usually give you a good clue as to how risky the bond is.

Column 2-Coupon
Coupon payments are simply the interest rate that will be earned on the specific investment. The coupon
payments listed in the bond table will be fixed, meaning that they will not vary over time regardless of economic
conditions. Keep in mind that the coupon rate will be listed as the annual rate. Since most bonds pay the coupon
semi-annually, the rate that you earn per payment will be divided by two. For example, a coupon rate listed as
eight percent means that the investor will earn four percent twice a year.
Column 3- Maturity Date
Maturity date refers to the date when the investor will receive the principal payment. For example, if an investor
purchases a bond that is worth one thousand dollars at maturity, this is the amount that he/she will receive.
Maturity dates are quoted in bond tables as the month/date/year. However, only the last two digits of the year will
be quoted. For example, 13 for 2013.

Column 4-Bid Price

The bid price gives the investor a good idea of how much other investors feel the bond is worth. It is always
quoted in relation to the bond’s face value which is often $100. If a bid price of 97 is quoted in a bond table, it
means that the bond is trading at 97 percent of its face value, or in this case 97 dollars.

Column 5-Yield
A bond’s yield is described as the return an investor will earn on the bond until it matures. It is usually quoted as
an annual rate in bond tables. If a bond is callable, meaning that the issuer can buy it back before maturity, it will
usually be indicated by a c in this column.
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aknowledges that the mention of products in this website is no guarantee of performance. Investogram accepts no
responsibility whatsoever and reccomends that readers use this site for general education and then consult an
investment professional before any purchase.

Corporate and Other Bonds 

Businesses frequently issue bonds to raise money. State and local
governments and other government entities also issue bonds to fund various
projects.

If you own them in paper form, these bonds may differ significantly from each
other, but all will contain some basic information about the bond issuer, the
investment itself, and the bond's purchaser. Here's what to look for:
  The bond certificate will show an amount in U.S. dollars if the bond is
issued in the United States and in foreign currency if it's issued
somewhere else. 
 The certificate also will show a bond number or a serial number that is
unique to that bond.
 The issuer's name will appear, usually on the top of the certificate. The
bond may also indicate the reason why the issuer is selling bonds and
may indicate the interest rate or the terms of the investment.
 The bond will show the bond purchaser's name. This may be printed on
the certificate or written into a blank space.

Some short-term corporate debt securities with maturities of less than 270

days are referred to as "commercial paper," but this is largely the domain of
institutional investors. With the exception of commercial paper held indirectly
through money market mutual funds or other comparable cash equivalents, it's
unlikely you'll ever invest in commercial paper yourself given the demonstrably
superior alternatives, such as short-term certificates of deposit or even
savings accounts.

Reissuing Savings Bonds vs. Replacing Savings Bonds

There is a big difference between replacing lost, mutilated, or destroyed
savings bonds, and reissuing savings bonds because you want to change
information. Here is a handy list of guidelines to help you determine if you'll
need your savings bonds reissued or replaced. Visit TreasuryDirect.gov for
more information and to verify that these procedures are current.

Bonds DO NOT need to be reissued if there are name changes due to

marriage, minor typos in the spelling of your name, address changes, or if the
social security numbers are printed wrong. In the case of the latter, the
government will want to have the correct social security number on file for
reference and ease of search. You'll need to write a letter to Treasury Retail
Securities Site with personal information like the incorrect and correct social
security numbers, and information for the affected bonds like the serial
number, issue date, denomination, and the registrants.

Bonds DO need to be reissued if there are significant errors in first or last

name, or any other major typos or misspellings. Also, a reissue is required if a
court appoints a guardian or conservator over the living owner of the savings
bond. Other cases include the death of the savings bond owner or owners,
changing ownership of the bond to a personal trust estate, changes of name
due to divorce or annulment, adding additional owners to the bond, and
changing beneficiaries. Each of these situations has its own guidelines to
follow and forms to fill out
When investors buy a bond initially at face value and then hold the
bond to maturity, the interest they earn on the bond is based on the
coupon rate set forth at the issuance. For investors acquiring the
bond on the secondary market, depending on the prices they pay,
the return they earn from the bond's interest payments may be
higher or lower than the bond's coupon rate. This is the effective
return called yield to maturity.

For example, a bond with a par value of $100 but traded at $90
gives the buyer a yield to maturity higher than the coupon rate.
Conversely, a bond with a par value of $100 but traded at $110
gives the buyer a yield to maturity lower than the coupon rate.

2nd Seatwork in FM 5

1. A municipal bond and a corporate bond offer you the same yield of 8%. Both have the same
risk of default.

A. Which bond would you prefer if you were a tax-exempt investor? Explain

B. Which bond would you prefer if you pay 31% tax on interest received? Explain.

2. Assume that the expected return on land is 15%, on rare coins 12% and on stocks, 19%. How do
you think these assets should be ranked accdg to risk?

3. Assume your mother, who is 67 years old and a retired high school teacher, has come to you for
investment advice. She tells you that she is frustrated with the 3.5% she is earning on her savings
and knows there must be a better way for her to invest her savings. What advice would you give
her? What factors should you consider in offering her investment advice?

4. Selling a house involves advertising costs, realtor commissions and lawyer fees to write
contracts. Is a house a liquid assets? Why or Why not?