HOW TO GET THE BEST PRICE WHEN BUYING A BOND ON THE SECONDARY MARKET?

Stocks have the bid/ask widespread which fluculates by the trade day as well as have been really transparent. Bond pricing is not pure so how do I know if I’m removing the most appropriate cost when I buy the bond, as well as not only the profit-inflated cost from the merchant which is perplexing to sell it?

{ 3 comments… read them below or add one }

Thinktank July 28, 2010 at 10:53 pm

Unfortuantely you dont unless it is an exchange traded bond which I doubt.

I suggest calling several brokers and giving them the cusip number and how many bonds you have and ask them to get you the best price. If you call and say “i’m Joe Blow and I want to sell my XXX bonds and here is the cusip” they are going to know that you know what you are talking about and are less likely to give you the run around.

Have a man make the phone call if you are a woman. The secutites business is a good ole boy system still and ladies aren’t always treated fairly.

tsbr1963 July 28, 2010 at 11:51 pm

If you are talking about municipal bonds, try http://www.investinginbonds.com
It gives trades on munis as quickly as 3 or 4 minutes after a trade. If you know the cusip, you can look up trade history on the bond. It is very very very useful. For corporates, I know there is a system called TRACE which is similar to investing in bonds. Also, alot of the larger corporate issues are listed in the paper. BTW, if you are buying bonds from a stock broker….rather than someone who deals specifically in bonds..you are putting yourself at a disadvantage. Bonds have always been less sexy to the brokers and most choose not to learn about them. Also- try municenter.com I am pretty sure you can get onto the site as an investor. It shows live tradable offers from a bazillion different dealers and can help you do “searches” and give you a good idea of where levels should be and where different paper is trading. Good Luck!

***PS- I just looked up TRACE. It IS available to investors…NOT just traders like me. It is pretty slick. Go to NASDbondinfo.com and put in the corporate bond cusips. You get delayed, but real, trade data on the bonds. And, I gotta disagree w the person who said it is “a good ole boy” network. Some of the best traders and best sales people (institutional sales people) I know are women. If a guy only wants to deal w guys…he is cutting off his nose to spite his face….25 years ago…yup. Mostly guys. Today? No way. Its math and numbers…much like high speed chess. Nobody cares who is on the other side of the phone…it could be a computer for all I care. Anyway…good luck.

john_ross_nyc July 29, 2010 at 12:47 am

Contact the Edward Jones investment rep nearest you. Go to their website at http://www.edwardjones.com and enter your zip code to find the closest office. With 10,000 locations, chances are there’s one within 10 miles of where your live.

As for WHY your would want to this, contrary to the last answerer’a assertion that brokers don’t find bonds sexy and hence don’t bother learning about them, throughout their 135-year history, Edward Jones made their business on selling quality bonds to individual investors. I’ve found some of the most knowledgable people I know regarding bonds to work for Edward Jones. In addition, they do so much bond business that they get optimal pricing and that is in turn passed on to you. When calling around for price quotes, at the very make sure you include them, you won’t be sorry.

I should point out that unless you need the money, now is probably not a good time to be selling your bond. Although long-term interest rates (i.e., that of most bonds, which are driven by economic factors) have little to do with short-term rates (which are directly driven by the Fed), we are nevertheless in a rising interest rate environment and your bond undoubetdly is worth less than it wa a year ago. Of course, you could be banking on that and need a tax loss for some reason, but barring that, if you’re getting good interest, hold onto it until rates go down again to get a more advantageous price.

Of course, when buying bonds specifaclly for the interest income, you should learn not to even care what the price is. It’s hard psychologically, and it takes some getting used to, but it’s worth it. After all, if you’re buying a cow for the milk, then what the hell do you care about the price of beef?

Hope this help!
–J.

Leave a Comment

Previous post:

Next post:

http://www.maxprofitsinvest.com