Posted on January 15, 2012
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Bonds (Bond Overview)
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Bond Overview
Corporate Bonds
Convertible Bonds
Treasury Bonds
I Bonds
Municipal Bonds
Agency Bonds
Build America Bonds
Structured Notes
Bond Yields
Treasury and Savings Bond Yields
| Type | Yield | Institution |
|---|---|---|
| Series I Bonds | 0.74% | US Treasury |
| 3-Month Treasury | 0.01% | Various brokerages |
| 6-Month Treasury | 0.07% | Various brokerages |
| 2-Year Treasury | 0.19% | Various brokerages |
| 5-Year Treasury | 0.96% | Various brokerages |
| 10-Year Treasury | 2.26% | Various brokerages |
| 30-Year Treasury | 3.74% | Various brokerages |
National Municipal Bond Yields
| Type | Yield | 28% Eq Yield |
|---|---|---|
| 2-Year | 0.31% | 0.43% |
| 5-Year | 0.92% | 1.29% |
| 7-Year | 1.60% | 2.21% |
| 10-Year | 2.29% | 3.18% |
| 15-year | 3.05% | 4.23% |
| 20-Year | 3.51% | 4.88% |
| 30-Year | 3.85% | 5.25% |
Bonds (also known as fixed income) are some of the most widely used investment vehicles in the world.
The international bond market was estimated at $46 trillion in 2006 and the US bond market was estimated at $25.2 trillion. By comparison, the value of the world stock markets as of October 2006 was estimated at $36.6 trillion. Analysis of returns have shown that over long periods of time, bonds tend to outpeform stocks.
Bonds are a form of debt, similar to an I.O.U. In return for providing a company or a government with a loan, investors receive a promise for a certain rate of return over the term of the loan as well as repayment of the loan when the term ends or it "comes due".
Bonds come in many different shapes and forms and a bond portfolio may include several different types and maturities depending on the objective of the bond holder. Among those bonds that US nationals and US residents are most like to consider are.
US Treasuries
Among the safest bonds are U.S. Treasury bills, notes, and bonds. These securities are debt obligations of the U.S. government, the largest debt issuer in the world. Since these debt obligations are backed by the “full faith and credit” of the US government, and thus by its ability to raise tax revenues and print currency, US Treasuries are viewed in the market as having no “credit risk,” meaning that it is virtually certain your interest and principal will be paid on time.
Treasury bills mature in one-year or less. Treasury notes mature between 2-10 years while treasury bonds, also known as long bonds, mature between 20-30 years.
Other Bond Resources
- Bonds for Newbies and Beginners - A newbie purchasing bonds for the first time can be a little bit like the coffee virgin at Starbucks ordering his first ever specialty drink.
- Bond Basics - Basic bond terms and what to look for when thinking about buying bonds.
- Coupon Rate, Current Yield, and Yield to Maturity Explained - Key terms to know before investing in bonds.
- Three Popular Bond Investment Strategies - There are three popular strategies for investing in bonds - the barbell, the bullet, and the laddered bond strategy.
- Laddered bond portfolios - Learn the advantages of laddering your bond portfolio and how to do it.
- Bond Funds Versus Bonds - This article explores investing in bond funds versus individual bonds.
- Bond Fund Fees Explained - No matter what anyone tells you, no matter what you may read, mutual funds are not free, and you will pay for the privilege of owning shares.
- Bearer Bonds - Bearer bonds, also known as coupon bonds that are owned by the holder of the physical certificate, rather than being a registered security like bonds are today.
