• Register for the Bonds Bulletin and get a daily list of the most liquid bonds and other fixed income securities. From the homepage of our bond website, choose to get your list by RSS feed or email;
• Review the list to select bonds or GICs to buy or sell;
• Call the bonds trade desk at 1.866.980.9590 from Monday to Friday, 8:30 a.m. to 4:30 p.m. ET.;
• Speak to a trader about the availability and price of the bond. Remember, the minimum trade size is $5000;
• Confirm your order details with the trader.

A debt investment. An investor loans money to an entity (corporation or government) that borrows the funds for a defined period of time (the maturity date) at a fixed rate of interest (the coupon rate).

Bonds are commonly called fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents.

Bonds are generally viewed as safer investments than stocks, because bond volatility (especially short and medium dated bonds) is often lower than stocks. However, like any investment, bonds are subject to investment risk.

A bond's quote is a statement of its price, expressed in terms of percentage of the bond's face value or as a dollar value. Corporate bonds are usually quoted in 1/8th increments, while government bonds are typically quoted in 1/32nds.

Corporate bond quote example: 99 1/8 or $991.25
This represents 99.125% of par ($1,000), the amount repaid to the investor when a bond matures.

Bond liquidity
Liquidity describes how easy it is to sell a bond.

Highly liquid bonds, such as treasuries and blue-chip corporation debt, trade frequently. Illiquid bonds, such as those of a company close to bankruptcy, would trade much less frequently.

What determines the price of a bond?
The price of a bond is the sum of the present value of all expected future coupon payments (interest rate payments) and principal payments discounted at the bond's redemption yield or rate of return.

The redemption yield may be made up of the current yield and the expected capital gain or loss.

When investing in a bond, the valuation is only one of several factors to consider. The creditworthiness of the issuing company, the bond's price appreciation potential and prevailing and projected market interest rates also play important roles.

• Par value (or simply par)
  The face value of a bond (generally $1,000). It is the amount paid to the holder on the bond's maturity date.
• Coupon (or coupon rate or coupon percent rate)
  The rate of interest the bondholder will receive. It is typically stated as a percentage of the face value and is paid semi-annually.
  e.g., A $1,000 bond with a coupon of 6% will pay $30 every six months ($60 a year).
• Yield
  The return an investor gets on a bond. There are two important types of yields:
  • Current yield
    The annual return on the dollar paid for the bond; the interest rate divided by the current price.
  • Yield to maturity (YTM)
    The rate of return anticipated on a bond if it is held until the maturity date. It takes into account the current market price, par value, coupon rate and time to maturity. It is assumed that all coupons are reinvested at the same rate.
• Maturity
  The length of time until the principal amount of the bond must be repaid. It is the date the borrower must pay back the money borrowed through the issue of the bond.
• Basis point
  A unit for measuring a bond's yield. One basis point equals 1/100th of 1% of yield (or 100 basis points are equal to 1% of yield).
• Accrued interest
  The interest that has accumulated on a bond since the last interest (coupon) payment.
• Yield curve
  A line that plots interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares three-month, five-year and 30-year debt.
  The shape of the yield curve is closely analyzed because it indicates future interest rate changes and economic activity:
  • Normal yield curve: longer maturity bonds have a higher yield compared to shorter-term bonds due to the risks associated with time. The greater the slope, the greater the gap between short- and long-term rates.
  • yield curve: shorter-term yields are higher than the longer term yields.
  • A flat or humped yield curve: shorter and longer-term yields are very close.

Bond ladders, bullets and barbells are three popular strategies for investing in bonds.

Bond laddering
Laddering occurs with the purchase of a series of bonds that have increasingly longer terms to maturity. This is similar to dollar cost averaging in the stock market.

Laddering can be helpful in managing interest rate risk associated with longer-term maturities. If rates are favourable, you can reinvest at these higher rates when a security matures. If rates are not favourable, you'll continue to have a portion of your portfolio in higher yields than the market.

The bullet strategy
Also known as maturity matching, this approach involves purchasing bonds (at staggered dates) that mature at the same point in time.

Bond bullets are ideal for investors who do not need to recover their principal until a specific date in the future, such as for retirement or for a child's education. Interest rate risk can be minimized by staggering the purchase of bonds.

The barbell strategy
The barbell approach omits medium-term bonds completely. Only short-term bonds (maturing in two years or less) and long-term bonds (maturing in 20 to 30 years) are purchased.

As there is more risk in the price of a bond with a longer term to maturity, this strategy is the most aggressive. Traders that buy this strategy are anticipating that longer-term yields will drop and bond prices will move higher.

Follow these links to dive deeper into the world of bonds.

BestCashCow.com

Canadianfixedincome.ca

getsmarteraboutmoney.ca

InvestinginBonds

wikinvest

ZenWealth bond calculator

PIMCO

Investopedia:

• Bonds
• Bond prices

Questrade:

• Bonds: an introduction to bond basics
• Bonds: more on bond investing
• Strip bonds and strip bond packages: information statement