Candlestick Trading Blog
September 25, 2009
Bond Trading
| Bond trading requires some considerable financial knowledge in order to invest wisely. In fact some investors feel that it is more complex than investing in the stock market. In today’s article we discuss primary and secondary bonds as it relates to corporate bonds as well as exchanged traded funds. When bond trading you should know the difference between primary and secondary bonds as it relates to corporate bonds. Primary bonds are extremely difficult to get when bond investing. Many are only able to do this through their connections, such as knowing a banker at one of the institutions that is managing the primary offering. Secondary bonds are easier to obtain than primary bonds. The secondary market is the buying and selling of bonds after the initial public offering and it is open to smaller investors. This market is almost completely an over-the-counter market where trades are mostly done on closed bond trading systems that are proprietary or that are done over the phone. When investing in bonds in the secondary market you must go through a brokerage firm. While you do have a broker to help you, it is important that you still do your own research to find out if the price you pay for specific bonds is reasonable. You should research things such as the mark up or the spread when you buy bonds. The spread is the difference between what the broker pays for a bond and what he or she is selling the bond for. The spread is actually built into the price of the bond so it is difficult to determine how much profit the broker makes. When bond trading it is important to know that the corporate bond the primary and the secondary market are considered to be two distinct levels. Basically a corporation sells bonds in order to raise capital. The company negotiates with investment bankers and large financial institutional investors in order to place those bonds in the market. Placing these bonds in the market is similar to coming up with initial offerings of stock to place on the major stock exchanges. Exchange traded bonds are a very small percentage of the overall market, estimating at around less than 15%. These new exchange traded funds trade like stock on a public exchange and replaces some of the older automated bond systems. Smaller investors are seeing opportunities in these exchange traded bonds. Investing in stocks and bonds is a great way to diversify your investment portfolio. Continue to do you research and find out which types of bonds you should invest in. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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