How to Read Bond Tables & Monthly Bond Yield Tables
If you're planning to invest in the bond market, you should learn how to interpret key statistics -- known as "bond tables" after their tabular format. This information is easy to find from numerous sources, including such financial dailies as the "Wall Street Journal," "The Financial Times" and "Investor's Business Daily." You can obtain real-time data by visiting the websites of these publications or tuning into financial news channels such as CNBC or Bloomberg News.
Issuers and Bond Types
Bonds are a type of long-term debt issued by corporations as well as federal, state and local governments. The financial media usually organizes bond market data by bond type, such as U.S. Treasuries, municipals, corporates, mortgage-backed securities and international debt. In addition, bond tables may identify specific bond issuers. For example, the corporate bond section in the back of a newspaper might list Microsoft and General Electric as issuers. The issuer's name may sometimes be represented by its stock symbol, such as MSFT for Microsoft or GE for General Electric.
Maturities and Coupons
Bond tables will list a bond's maturity, or the date when the issuer is contractually required to repay the debt's principal. Bonds with early redemption features, such as callable bonds, are often flagged along with their early redemption date. In addition, bond tables will include a bond's coupon, or the interest rate as a percentage the bond's face value. For example, a bond with a face of value of $1,000 and a coupon of 6 percent would pay $6 of interest annually, irrespective of the bond's trading price.
Bid and Ask Prices
Bond prices are split into two components: the bid, or the price that buyers are willing to pay, and the ask, or the price at which sellers are willing to sell. U.S. Treasuries are quoted as whole numbers and fractions of 32nds separated by a colon. For example, a 10-year Treasury with a bid of 105:6 means that buyers are willing to pay 105 and 6/32, or $105.1875. Other types of bonds present bid and ask prices slightly differently; municipals, for example, show bonds as whole numbers and fractions of eights, such as 102 1/8.
Yield to Maturity and Yield to Worst
A bond's yield offers a more accurate measure of return relative to its coupon. Bond tables will include a bond's yield to maturity, or how much investors will earn from their investment at current market prices. Bonds that are trading below par, or $100, have a higher yield to maturity than their coupon, whereas the opposite is true of bonds trading below par. For example, a bond with a coupon of 12.5 percent might have a yield of 13.5 percent if it's trading at 98 1/8. Bonds with early redemption features may also be associated with a yield to worst, or the yield in the event that the issuer calls the bond.
Giulio Rocca's background is in investment banking and management consulting, including advising Fortune 500 companies on mergers and acquisitions and corporate strategy. He also founded GradSchoolHeaven.com, an online resource for graduate school applicants. He holds a Bachelor of Science in economics from the University of Pennsylvania, a Master of Arts in English from the University of Hawaii at Manoa, and a Master of Business Administration from Harvard University.