Table of Contents
- What Is a Bond Quote?
- Key Takeaways
- How a Bond Quote Works
- How to Read a Bond Quote
- Additional Information in Bond Quotes
- Tip
- Types of Bond Quotes
- What Is a Bond?
- What Is the Difference Between the Bid and the Ask Price?
- How Do Changes in Interest Rates Affect Bond Quotes?
- What Is the Significance of a Bond Being Quoted at a Premium vs. a Discount?
- Are All Bonds Quoted in the Same Way?
- The Bottom Line
What Is a Bond Quote?
Let me explain what a bond quote is: it's the current price at which a bond is trading in the market, and it's crucial for you as an investor or trader to assess value and make decisions.
You'll see bond quotes shown as a percentage of the bond's face value—that's the amount it was issued for and what it'll be worth at maturity.
By getting familiar with bond quotes, you can compare different bonds and figure out which ones to buy or sell.
Key Takeaways
A bond quote gives you the price and other details of a bond. It's expressed as a percentage of face or par value, then converted to a point scale. Par value is what the bond is worth at issuance; for a $1,000 par, a quote of 100 means 100% of that value. Sometimes quotes use fractions too.
How a Bond Quote Works
A bond's face value, or par value, is usually $1,000, and quotes are a percentage of that. If you see a quote of 98, that's 98% of $1,000, so $980. A quote of 102 means $1,020.
Prices fluctuate due to interest rate changes, credit rating shifts, or market conditions. Look at bond quotes to check current value, see price trends, and decide if you should buy, hold, or sell.
How to Read a Bond Quote
Reading a bond quote might look tricky at first, but it's straightforward once you break it down. Take this example: “VZ40 - 101.25 - 3.892%, 06/30/28, 5%, AA”.
The ticker VZ40 identifies the bond. The price 101.25 is a percentage of face value—multiply by 10 for $1,012.50 per bond.
The yield 3.892% is the annual return, often yield to maturity. Maturity date 06/30/28 is when you get the principal back. Coupon 5% is the fixed annual interest. Credit rating AA means high quality, lower risk than AAA but still strong.
Bonds get rated by agencies like Moody's or S&P, reflecting issuer creditworthiness. Higher ratings like AAA or AA mean lower risk; lower ones like BB or C mean higher risk. In the US, you have government Treasurys as the safest, investment-grade corporate or municipal bonds, and high-yield junk bonds.
Putting it together, this bond trades at $1,012.50 above face value, yields 3.892%, matures in 2028, pays 5% coupon, and has a solid rating. If you buy it, expect that yield until maturity.
Additional Information in Bond Quotes
You might also see bid and ask prices: bid is the highest buy offer, ask is the lowest sell offer. Some quotes show just the last price, others include bid and ask. There's also the CUSIP number for unique identification.
Tip
You can get bond quotes from financial news, brokers, advisors, or online platforms for real-time data.
Types of Bond Quotes
Face value quotes are percentages of $1,000 or $100, like 95 meaning 95% of face—common for Treasurys. Yield quotes use annual yield to maturity, like 5.25%, for easy comparisons in corporate and municipal bonds.
Spread quotes show yield over a benchmark like Treasurys, say +175 basis points. Pure price quotes are straight dollar amounts, useful for non-standard bonds like mortgage-backed securities.
These types let you compare based on face value, yields, spreads, or prices, giving different ways to evaluate bonds.
What Is a Bond?
A bond is a debt security—basically an IOU. When you buy one, you're lending money to the issuer for periodic interest and face value return at maturity.
What Is the Difference Between the Bid and the Ask Price?
Bid is the max a buyer will pay; ask is the min a seller will accept. The spread is the difference. Liquid bonds like Treasurys have tiny spreads; illiquid corporates can have wider ones, like $97 bid and $99 ask.
How Do Changes in Interest Rates Affect Bond Quotes?
Interest rates and bond prices move inversely: rates up, prices down, and vice versa. This shows in quotes as price changes.
What Is the Significance of a Bond Being Quoted at a Premium vs. a Discount?
Premium means above face value, maybe due to higher coupon than market rates. Discount is below, perhaps from lower coupon or issuer credit issues.
Are All Bonds Quoted in the Same Way?
No, quotes vary by type—Treasurys often by yield, corporates and municipals by price or yield, due to different features and markets.
The Bottom Line
Bond quotes provide the key info you need to evaluate and compare bonds. Master reading them, and you'll make better investment decisions.
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