Bond Market and Bond Yields

Investing in bonds is the most reliable investment in the securities bond market. This tool is recommended for those who care about the complete safety of capital with a fixed income slightly higher than that interest rates of a bank deposit. A bond market holder receives a fixed income from his investment in the form of interest payments. Also, in many cases, bond prices below par (at a discount), and they are repaid by the borrower at par bond prices. 

Exchange-traded bond market

The exchange-traded bond market is a regulated financial space fixed income where the purchase, sale, and exchange of bond prices takes place according to the established rules interest rates. Bond market players and legislation regulate these rules. Thanks to the official circulation of securities, it becomes possible to compile statistics. Statistics reflect the effectiveness and quality of treatment of fixed income. Let us consider in more detail the features of the bond market. 

Features of the bond market

  • The issue for some stock market players; 
  • the number of shares should not exceed the authorized capital of the enterprise interest rates; 
  • it takes some time to place a bond on the market; 
  • details accompany bonds; 
  • bonds are divided into echelons; 
  • presence of fixed income risk groups; 
  • the market has an international status and rights reserved.

High yield bonds in trend – what to buy?

Only high-yielding Eurobonds (High Yield) with a rating lower than investment retain the potential to reduce yields, so the demand for a high-yielding bond market in foreign currency breaks records.

Investors are becoming less picky in the face of growing expectations for lower foreign exchange interest rates and a limited volume of good issuers (now Chinese companies dominate the emerging bond market for foreign currency bonds fixed income). Besides, the record share of negatively bond prices Eurobonds in the debt stock market encourages a more active search for securities with adequate positive returns. In this review, we wonder if this portends a correction, and if not, what current ideas to buy can be highlighted.

Bond trading features

The bond market is generally considered a safer investment tool than stocks since their owners take precedence in demanding a share of the company’s assets in the event of its liquidation or restructuring. For issuers, the bond market is a reliable alternative to banks and other lenders, who may offer less attractive financial conditions than capital markets: for example, higher interest rates on loans.

  • A bond market is a debt security. Having bought a bond of the issuing company, the investor becomes its creditor. The issuer is obliged to pay the bondholder at the end of its circulation the face value of the bond market and a well-known or easily predicted stable fixed income in the form of a percentage of the face value;
  • bonds are issued by companies of various industries, as well as banks. In 2004, more than 80 companies and banks issued their bonds. Among them were both high-class and less reliable issuers;
  • bonds can be bought in the same way as stocks – through the Internet. All basic exchange data for each bond issue are broadcast to bidders and are available through trading terminals. However, to buy bonds, it is not necessary to establish a trading terminal and make transactions interest rates with bonds via the Internet. A broker can purchase bonds for you if you give the order by phone.

What has been happening in global markets since the beginning of the year?

  • From the beginning of the year until recently, despite good data on employment in the US non-farm sector in June, the yield of 70% of outstanding bond market updated 12-month lows, while the average yield of high-yield sovereign bonds with a rating below BB- exceeded 20% against 18 % S&P 500;
  • spreads of 20% of securities on the credit market are narrowing, and more than 26% of bonds, mainly European ones, are traded with negative yield;
  • 40% of the global stock market went up to a 12-month high. Russian shares rose 28% since the beginning of the year;
  • the global bond market is overestimated when compared with real economic growth, forecast growth in the third quarter, or the period after the resumption of quantitative easing by the ECB.

Is it time to invest in bonds

As we wrote earlier, it is important to harmonize expectations and investment requirements. Shares have liquidity and potential profitability (or loss) but do not provide security for fixed income assetрs. Government bonds have a declared yield and a high degree of security. However, to be guaranteed to receive the declared yield, treasury bonds must be held until maturity, and they can be illiquid (if liquidity is part of your goal).

Conclusions and recommendations

Are you interested in a contribution to the bond market with subsequent trading in them? Contact Dowmarkets staff to help you learn how to trade bonds. Participants can resort to the help of consultants and start activities in the stock market. At first, new investors cannot influence the bidding. Over time, with a competent consultant, they can become serious players.

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