How to choose a bond, step by step
beginner
Automated material · TradeAlmanac editorial deskDraft prepared by a language model from our stored data; not reviewed by an editor.
Содержание · 5
Step 1. Decide the term
Not "which yield is higher" but "when will I need the money". Selling a bond early after rates have risen means locking in a loss on price.
Step 2. Settle the question of credit quality
OFZ (Russian federal loan bonds) means the state. A corporate bond pays a premium for the risk of not being paid. Assess the issuer on leverage and cash flow rather than on yield alone.
Step 3. Check whether there is a put date
If there is, compute the yield to that date. Yield to maturity on such a bond describes something that almost certainly will not happen.
Step 4. Look at liquidity
A narrow Spread and regular trades mean you will be able to exit at a reasonable price. In an illiquid issue the quote is a fiction.
Step 5. Account for accrued interest
The debit will be the price plus Accrued interest. Over a short horizon that is a noticeable part of the investment.
Frequently asked
- How does yield to maturity differ from the coupon?
- The coupon is a payment. Yield to maturity also accounts for the difference between the purchase price and face value, which is what makes different issues comparable.
- What happens to the price when rates rise?
- The price falls: new issues start carrying larger coupons, so older bonds have to get cheaper to match them on yield.
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Draft prepared by a language model from our stored data; not reviewed by an editor.
Model: claude-opus-5
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