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You can see the closing bid and ask spread in the WSJ quoted for trades of
$1 million or more. Correct me if I am wrong but a) the Bloomberg terminals
are far too expensive for the average bond investor and b) bid/ask prices
are quoted for transaction size of $1 million and greater again far more
than what the average bond investor will want to put in a single issue in a
laddered portfolio.
Earl
----- Original Message -----
From: "profitok" <profitok@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Monday, January 14, 2002 11:32 AM
Subject: Re: [RT]Bonds 101
> 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/
> >
> >
>
>
>
> To unsubscribe from this group, send an email to:
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>
>
>
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>
>
>
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