Understanding Bond Pricing - Fidelity Investments

Understanding Bond Pricing

By better understanding bonds, you can more confidently use them to strengthen your portfolio.

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Develop an Ongoing Strategy with Fidelity

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Education on securities

Resources to help inform and assist you in managing your assets

Insights for helping you make more prudent and informed decisions

Common Questions

1

How many of you currently have bonds in your portfolio?

2

Ever wonder why it's harder to get a bond quote than a stock quote?

3

How many of you have a grasp on what you're being charged per bond trade?

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Comprehending the Bond Market

Understanding Trading Costs

Assessing Pricing for Individual Bonds

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Today's Agenda

Makeup

Understanding the Bond Market

Size

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Volume

The Makeup of the Bond Market Varies from the Stock Market

Makeup

Size

Trading marketplace

Pricing transparency

STOCK MARKET

Equity shares of publicly owned companies

Limited to size of shares offered by companies

Centralized (Ex. NYSE or NASDAQ)

Generally transparent and liquid

BOND MARKET

Debt securities issued by corporations, governments, government agencies, municipalities

Relatively small and large debt instruments

Fragmented, bonds are traded "over the counter."

Larger issuance = more transparent/liquid Smaller issuance = opaque pricing/less liquid

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Size

CHARACTERISTICS

Market Size1

BOND

$39 Trillion

STOCK

$30 Trillion

Daily Trading Volumes2

$763 Billion

$292 Billion

Number of Securities3

Ford (example) Outstanding4

Ford (example) Number of Issues4

1,100,000 $75 Billion 297

5,540 $49 Billion 1

1.Bonds--SIFMA, Q3 2017, Equity NYSE, S&P 500, Dow, NASDAQ. 2. Bonds--SIFMA, Q4 2017, Equity AMEX/ARCA, NYSE, NASDAQ, BATS, DirectEdge. 3. Bonds-FINRA Jan 2018, Equity-World Federation of Exchanges Dec 2017 4.Bloomberg--Recent 10-K filing. In general, the bond market is volatile, bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for long-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

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