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If you have Bloomberg terminal you can see
all dealers bid and asks for treasuries
Ben
----- Original Message -----
From: "Earl Adamy" <eadamy@xxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Monday, January 14, 2002 10:02 AM
Subject: Re: [RT]Bonds 101
> Investing in bonds is far different than trading bonds!
>
> Start with the costs. I can turn a bond futures contract worth $100k+- for
> well under $20 in round turn costs and trade in a very liquid market where
> bid ask spreads are a tick (1/32) ... this is good for trading. Following
> First Notice Day at the end of the quarterly contract, I can exercise a
long
> bond contract for a exchange designated "equivalent" cash bond contract
...
> this requires both care and knowledge.
>
> Cash bonds are a different animal and you will not be able to deal for
> anything approaching the 1 tick spread typically shown in the WSJ treasury
> tables. When I buy 100 (x 1000) cash bonds worth $100k+- at Fidelity, I am
> doing business with a dealer who carries its own inventory where I am
shown
> the ask only to buy bonds but must sell bonds by phone ... typical spread
is
> around 32 ticks or 1% so my cost to buy 100 cash bonds will be around
> $1,000+-. To add insult to injury, they will sock you with a $75
commission
> if the order is for less than 25 bonds - a fact which can make it
expensive
> for a modest account to "ladder" bonds across a range of maturities.
Bottom
> line, when I buy a cash bond I expect to hold it for some years. Further,
> Fidelity bond traders will not always honor posted quotes ... a fact about
> which the SEC seems to be curiously uninterested. I have looked for other
> bond brokers but the information available on broker spreads is pretty
hard
> to come by.
>
> Treasury bonds issued post Feb-1984 are not callable, whereas bonds issued
> prior to that date are callable 5 years before maturity e.g. 1983 + 30 =
> 2013 maturity which would be callable 2008. If a bond is callable, you
must
> look at yield to the call date rather than yield to maturity date (this is
> true for all bonds, not just treasuries).
>
> Since longer term bonds are issued all across the interest rate cycle, you
> will find bonds offered at a premium to par because the coupon rate is
above
> the current market rate, and bonds offered at a discount to par because
the
> coupon rate is below the current market rate. Bottom line for a long term
> bond investor is that it does not matter because the price/yield
> relationship will be at current market rates with the premium/discount
> effectively being prorated over the term to maturity because redemption is
> always at par (the guaranteed return of par and the coupon payment is what
> makes bonds different from stocks). Further, as a long term investor, you
> can look for the "off-run" bonds which carry small premiums in yield over
> the "pure" 30 ... see the treasury bond tables. I hold cash bonds with
> yields as high as 8.125 and as low as 5.5 ... don't really care that much
> about premium/discount, am looking at the quoted yield when I purchase.
All
> things being equal I prefer to purchase at a discount e.g. 95 to
purchasing
> at a premium e.g. 124. There are instances where premium/discount can make
a
> real difference over the short term. This is true of taxes and it is true
in
> bond funds which can "juice" stated yield by loading in higher coupon
bonds
> trading at a premium.
>
> Earl
>
> ----- Original Message -----
> From: "Michael Ferguson" <wl7bdn@xxxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Sunday, January 13, 2002 8:58 PM
> Subject: Re: [RT]Bonds 101
>
>
> > Supposing someone is holding a T-Bond from 11% days, pretty good
returns,
> > why would someone sell it back to the treasury buy-back ?
> >
> > I thought I saw a strategy to work up higher yields in a bond portfolio.
> The
> > higher the better, yes?
> > So how did the treasury buy back work? What is the incentive to sell?
> >
> > More 101 stuff
> >
> > 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/
> >
> >
> >
>
>
>
> 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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