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"Par" is just the number 100, but it represents the price at which the
market yield equals the coupon and the price at which the bond will be
redeemed at the stated maturity date (absent any early call conditions).
Bond prices move inversely to yield and rarely trade exactly a par, in fact
they are most often not issued at par because the coupons are often round
fractional numbers and even if the coupon exactly matched the yield on the
date of pricing, the yield would have changed by date of issue.
If you want to own treasuries, the best bet is to own the bonds themselves
because the bond will always be redeemed at par at maturity and because
there is little point in having a manager take a hefty fee off the top ...
often 20% of the yield. Two other reasons are that most bond fund managers
do not outperform the Lehman indexes and long term treasury funds are very
hard to find. OOH, corporates and Governments (GNMA, FNMA, etc.) are best
owned in a fund in order to diversify the various credit and call risks.
Here are a few good ones all of which are 5 star:
Dreyfus DRITX
Fremont FBDFX (Bill Gross on cheap)
Harbor HABDX (Bill Gross on cheap)
Municipals are another animal I would own in a fund rather than
individually, but some investors like individual municipals.
Earl
----- Original Message -----
From: "Michael Ferguson" <wl7bdn@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Saturday, January 12, 2002 2:25 PM
Subject: Re: [RT]Bonds 101
> John, Michael, Norman, Earl,
>
>
> > > T's are back up to par! I expect a flight to quality and back to
bonds
> in
> > > the upcoming weeks as investors realize that, despite all the rah=rah
> from
> > > Wall Street, there's no quick short-term recovery in the offering.
> > >
> > > Sound like a bond goul don't I? You betcha there's a reason.
> > >
>
> Will someone please explain bonds ?
>
> I have lots of questions, I may know some facts. But I don't know what I
> don't know.
>
> I would like to know for sure the significance of an issue being "back up
to
> par".
>
> What are the viscissitudes of owning bonds or buying bond funds?
>
> Michael
>
>
>
>
>
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
>
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
>
>
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