Bond Market Rules: 50 Investing Axioms To Master Bonds for by Michael D. Sheimo

By Michael D. Sheimo

In ultra-modern go-go industry, traders' attitudes towards risk--as good as towards bonds--have gone through a dramatic transformation. the hot ideas of bond making an investment are complicated, usually complicated, and if misunderstood, almost certainly dear. BOND marketplace ideas offers concise, easy-to-read explanations--from making an investment basics to complicated buying and selling strategies--to offer you a complete review of bond making an investment. additionally, it really is a terrific fingertip connection with present day so much relied on principles, supporting you recognize at a look how a bond may still act in any given situation--and simply as very important, the way you should still act to guard your investments. separately, anybody of the 50 chapters in BOND marketplace ideas might prevent a fortune in portfolio mistakes and miscues. jointly, they supply not anything below the main entire handbook on hand on figuring out the bond industry in and out. for instance: bankruptcy three discusses the real which means and significance of the yield curve, a favored but usually misunderstood bellwether of attainable adjustments within the economic climate. bankruptcy sixteen explains the "ladder" strategy--and the way it delivers liquidity for lengthy- time period bond traders, whereas minimizing the results of reinvestment possibility. bankruptcy 27 describes the pluses and minuses of the preferred 0 coupon bonds, and why they can be most popular for retirement funding debts. bankruptcy forty nine discusses the promising yet unstable new "Brady" bond--what it really is, the way it works, and why February and March are frequently the main ecocnomic months to shop for a Brady. easily placed, bonds can be part of any assorted portfolio. moreover, new attitudes and funding items have made the fixed-income marketplace as interesting and very likely profitable because the inventory industry. by way of featuring and explaining the usefulness of state-of-the-art best 50 specialist bond buying and selling ideas, BOND industry ideas will inform you every thing you want to learn about this brilliant, in all likelihood profitable industry. by itself, or together with writer Michael Sheimo's different nuts-and-bolts guidebooks, it is going to provide you with a accomplished wisdom of the fixed-income funding global, and exhibit you the most secure, so much ecocnomic how one can comprise bonds on your different portfolio.

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Therefore, if interest rates decline, the investor need not be concerned that the stock will be 39 Copyright 2000 The McGraw-Hill Companies, Inc. Click here for Terms of Use. Bond Market Rules 40 F I G U R E 6–1 Dow Utility Average, 1988–1998 called for refinancing purposes. This also means there is no maturity date. Without a maturity date, the investor need not decide whether to go long- or short-term. The length of holding is entirely up to the investor, who can sell at any time. DOW UTILITY AVERAGE A look at the Dow Utility Average, a group of 15 utility stocks, shows how utility stock prices have grown in recent years (Figure 6–1).

17 Copyright 2000 The McGraw-Hill Companies, Inc. Click here for Terms of Use. Bond Market Rules 18 F I G U R E 3–1 Yield Curve for November 2, 1998 ANALYSES Some financial analysts observe the yield-curve movements for signals of strength and weakness in the economy. Such analysis is difficult, time-consuming, and all too often arrives at incorrect conclusions. Such conclusions were possibly the source of the old joke about economists predicting nine out of the last five recessions. NORMAL, STEEP, INVERTED, FLAT Four descriptors often used in connection with the yield curve are normal, steep, inverted, and flat.

6%. Short-term rates were forced down to make low-cost money available to stimulate business expansion. The strategy worked and business did indeed expand. 22 Bond Market Rules INVERTED YIELD CURVE When short-term money pays a higher rate than long-term, it signals the opposite of expansion. This is a time of contraction. It’s time to reign in the oxen and circle the wagons because the economy is overproducing and possibly heading for a recession. Interest rates are pushed up to make it more expensive to borrow money for business expansion.

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