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Bond Valuation > Bond Markets
Bond Markets
• Purchase Process
• Price Transparency
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Bond Valuation > Bond Markets
Purchase Process
• Buying a bond involves setting up an account with a broker and requesting that
the broker buy bonds on the buyer's behalf.
• An individual can also purchase bonds by investing in bond funds, which hold
baskets of bonds rather than competing for individual bond sales.
• Most bond funds pay out dividends more frequently than individual bonds.
Bond Brokers
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Bond Valuation > Bond Markets
Price Transparency
• A market is transparent if much is known–by many–about what products,
services, or capital assets are available at what price and where.
• In most developed bond markets, such as the United States, Japan, and western
Europe, bonds trade in decentralized, dealer-based, over-the-counter markets.
• Poor transparency contributes to investor differences in bond valuations, as well
as other inefficiencies that may lead to economic losses for market participants
and, ultimately, inhibit business development.
New York Stock Exchange
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Appendix
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Bond Valuation
Key terms
• bond funds A bond fund or debt fund is a fund that invests in bonds or other debt securities. Bond funds can be contrasted with
stock funds and money funds.
• hedge funds An investment fund that can undertake a wider range of investment and trading activities than other funds, but
which is generally only open to certain types of investors specified by regulators.
• market liquidity In business, economics or investment, market liquidity is an asset's ability to be sold without causing a
significant movement in the price and with minimum loss of value.
• Pension funds Any plan, fund, or scheme which provides retirement income.
• transparency (figuratively) openness, degree of accessibility to view
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Bond Valuation
New York Stock Exchange
Most bonds are not sold in centralized marketplaces, such as the New York Stock Exchange, leading to a lack of price transparency.
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Bond Valuation
Bond Brokers
Bonds can be purchased through brokerages, such Fidelity Investments.
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Bond Valuation
Which of the following statements regarding the bond purchasing
process is correct?
A) Some insurance companies are legally required to own bonds to
match their liabilities.
B) Individual investors can purchase bonds through a broker or a bond
fund.
C) All of these answers.
D) Bond funds generally pay higher interest than certificates of deposits
and money market accounts.
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Bond Valuation
Which of the following statements regarding the bond purchasing
process is correct?
A) Some insurance companies are legally required to own bonds to
match their liabilities.
B) Individual investors can purchase bonds through a broker or a bond
fund.
C) All of these answers.
D) Bond funds generally pay higher interest than certificates of deposits
and money market accounts.
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Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Bond Valuation
Which of the following is a reason bond markets may lack price
transparency.
A) There are a large number of debt issues outstanding.
B) All of these answers.
C) Bond markets sometimes lack a centralized exchange or trading
system.
D) In the US, Europe and Japan, bonds are traded in dealer-based overthe-counter markets.
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Bond Valuation
Which of the following is a reason bond markets may lack price
transparency.
A) There are a large number of debt issues outstanding.
B) All of these answers.
C) Bond markets sometimes lack a centralized exchange or trading
system.
D) In the US, Europe and Japan, bonds are traded in dealer-based overthe-counter markets.
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Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/
Bond Valuation
Attribution
• Wikipedia. "Transparency (market)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Transparency_(market)
• Wikipedia. "market liquidity." CC BY-SA 3.0 http://en.wikipedia.org/wiki/market%20liquidity
• Wiktionary. "transparency." CC BY-SA 3.0 http://en.wiktionary.org/wiki/transparency
• Wikipedia. "Bond (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bond_(finance)
• Wikipedia. "Broker." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Broker
• Wikipedia. "Bond fund." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Bond_fund
• Wikipedia. "hedge funds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/hedge%20funds
• Wikipedia. "Pension funds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Pension%20funds
• Wikipedia. "bond funds." CC BY-SA 3.0 http://en.wikipedia.org/wiki/bond%20funds
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