If you're considering an investment in bonds, a study of the bond tables will help you compare prices, yields, and maturities of government and corporate offerings. These tables are published regularly in major financial publications, including The Wall Street Journal, Barron's and The Financial Times. A careful scan of these tables gives you a good snapshot of not only bond prices but also the general trend in interest rates, a crucial factor that affects all investment vehicles.
Before committing any money to bonds, it's important to understand what they are. When you buy a bond, you are claiming a stream of income on the money you've invested. The yield on the bond is the interest rate offered for your money and remains fixed for corporate and government bonds. When the bond matures, your original investment is returned; in the meantime, the price of the bond can fluctuate. If you sell the bond before it matures, therefore, you may take a loss on your original investment. You must also factor in any transaction costs such as brokerage fees when you buy and sell.
A standard bond table contains multiple rows of individual bonds (captioned in the far-left column), and several columns of data for each bond. To be useful, a single bond table should contain bonds of similar type: corporate bonds, municipal bonds, U.S. Treasury bonds, high-yield (junk) bonds, European bonds and so on. In this way, you may compare prices and yields on bonds that have the same degree of risk and/or time to maturity.
Coupon and Maturity
The column marked "Coupon" gives you the interest rate paid on the original bond. Most bonds are denominated in $1,000 amounts ("par value"); a single bond with a 6 percent coupon, therefore, pays $60 a year to the holder (coupon is not the same as yield). The coupon rate is fixed and never varies. The column marked "Maturity" gives the date on which the issuer will redeem the bond and return all of the original investment to the holder. The month and year, and sometimes the date, are given, with the year indicated by two digits only. A small "c" indicates the bond is callable -- the issuer may redeem the bond at any time after the date given and prior to maturity.
The "Bid" and "Ask" columns show the current price of the bond. This is the value of the bond on the open market, and the price at which you may buy (the ask) or sell (the bid). For ease of reading, prices are quoted as if the par value is 100; therefore you must multiply the prices in the table by 10. If the bid price is less than 100, then the bond is selling at a discount to its par value; a price greater than 100 means the bond is trading at a premium. The "Yield" column shows the rate of return on the bond until it reaches maturity. This number depends on the coupon and the market price; if the bond is selling at a discount to par, then the bond will return a yield higher than its coupon rate.
Monthly bond yield tables allow you to compare the trends in bond yields offered by various governments. A single table will compare bonds of similar type, such as long-term U.S. Treasury bonds or European sovereign bonds. This allows you to compare "apples to apples," i.e., two or more bonds with comparable maturities, or geographic area or of similar type. In a common format, scanning a single row reveals how a single bond has varied over several months; each column lists the yield for a particular month.
Yield tables may also show variations over the past week, the past month and the past year, as well as the change in yield (either positive or negative) over the given time and the current yield. Yield tables in any format help you compare other kinds of investments with income streams, such as dividend-paying stocks, with bonds and decide which is the better investment, considering the risk and economic outlook.
You can also research bonds online, where sites dedicated to bond investing break down these investments by their prices, yields, maturities, issuer types, ratings and other characteristics. "The Bond Buyer," found at bondbuyer.com, for example, presents dozens of tables and price charts on municipal, corporate and government bonds. The Yahoo! Finance/Bonds page offers a bond screener as well as a glossary and a page on buying strategies. In addition, bond indexes found in both print and Internet media give the general direction of bond prices, much like the Dow Jones industrial average and the Standard & Poor's 500 chart the daily movement of stocks.
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.