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
Size
Bond Market
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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
$42 Trillion
STOCK
$36 Trillion
Daily Trading Volumes2
$852 Billion
$409 Billion
Number of Securities3
Ford (example) Outstanding4
Ford (example) Number of Issues4
1,150,000 $79 Billion 311
5,334 $34 Billion 1
1.Bonds--SIFMA,, Q3 2018, Equity-World Federation of Exchanges 2. Bonds--SIFMA, Q4 2018, Equity AMEX/ARCA, NYSE, NASDAQ, BATS, DirectEdge. 3. Bonds-FINRA Jan 2019, Equity-World Federation of Exchanges Dec 2018 4. FINRA--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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