Welcome to Income Securites Advisors








CORPORATE BONDS - There is quite a bit of difficulty for individual investors when trying to buy a corporate bond. There are thousands of bond issues in the market place but less than 1200 are listed on a major U.S. exchange. Bonds not listed on a major exchange are shown as OTC (Over The Counter) in our current recommendation heading (page 3&4) and as N/L (Not Listed) on our pricing pages. (5&6)

BASICS FOR TRADING BONDS

  • Auction Market-Bid/Ask/Spread
    • - Bonds like stocks trade on an auction market thus, they have a bid, the highest price offered to buy a bond, and an ask, the lowest price a seller hopes to get for their bonds. Most trades take place somewhere between these two prices.
  • Quantity
    • - The prices quoted are usually for trades of $20,000 (20 Bonds) or higher. When buying bonds in smaller quantities an investor will commonly have to pay a higher price than the ask price. The reverse is true when selling a bond in the secondary market; the price you receive may be lower.
  • Identifying a Bond
    • - When requesting a quote or placing an order for a bond be sure to carefully identify the bond completely by using: issuer, coupon rate, maturity date and, as an added precaution, the CUSIP number. Also include the number of bonds you want to buy or sell. Remember, 10 bonds represents $10,000 face value of securities.
  • Exchange Traded Bonds
    • - Exchange traded bonds are much easier to buy and sell than OTC or unlisted issues. Most full service and discount brokerage firms will be able to place an exchange order. Make sure you tell the broker that it is an exchange- traded bond, they often won't know this. B e f o re you place an order ask for a quote. Identify the bond by: issuer, coupon rate, maturity date and as an added precaution the CUSIP number. Include the number of bonds you want to buy or sell. Agreeing to the ask price quoted should ensure your buy, however, you can also place a bid at a lower price. When selling a bond you can offer it at the bid price or enter a new ask price. When submitting new bids be reasonable and make it near the market price. Have patience, the more liquid a bond is the better chance for an early execution. Many investors place Good Till Cancelled order for bonds, but don't forget that you have placed the order.
  • Not Listed (OTC) Bonds
    • - OTC bonds are difficult to buy and sell in small quantity. Most discount brokers will not shop for a specific bond. Thus, if it is not in their inventory, chances are an investor will not be able to execute an order. The sell side is also difficult for small quantities. Full service firms look beyond their own inventory however this does not guarantee an execution. Price quotes are very important and if it is possible multiple quotes should be obtained before placing and order. Be careful, don't chase a bond and watch for big spreads. It is best to specify a bid when buying and an offering or ask price when selling.
  • Accrued Interest
    • - The amount of interest accumulated but not paid between the most recent payment and the sale of a bond. When purchasing bonds on the secondary market, this is the interest the former owner earned but has not been paid. It will be added to the buy price of a bond and be paid to the seller. The new buyer will receive the full semi annual interest payment on the next pay date.