If you aren't familar with how over-the-counter markets work, check out the YouTube "Over-the-counter, over-the-top" by Paddy Hirsch, Marketplace senior editor.
Because the bond market is an over-the-counter market, it has been difficult to get transparency on bond pricing. This, of course, has been beneficial to Wall Street which thrives on opaqueness. The Financial Industry Regulatory Authority (FINRA) has remedied this to a degree by requiring trades to be reported so that investors can see recent trading activity in specific bonds. This allows bond transactors in government, corporate, and municipal bonds to see recent price and volume data at a bond specific level.
Trading Activity in Merck Bond
In Bonds (Part 2) I showed a specific Merck bond held in my Schwab account:
Actually, trade data can be obtained at the FINRA site. Click "Bonds" under "Market Data" and come to
On the next screen, at the "Search by" option select "CUSIP" from the dropdown list. The CUSIP is a security identifying tag. If you look back at the bond listing as shown by Schwab above, you'll see the CUSIP: 589331AE7. This will take you to :
CLICK IMAGE TO ENLARGE Note that here you have the price of the last sale, $124.654, and the yield, 3.959%. This, of course, is valuable info to keep a broker honest if you happen to be buying or selling this issue. But we can get more trade data by clicking the bond's name and scrolling down to the "Search for Bond Trade Activity." Here we can specify a date range and click "get results." I specified a 10-day period and came up with the following trade activity:
With this type of data, a bond buyer can more readily ascertain whether bid and offer prices are reasonable.
The FINRA site has an excellent tutorial explaining the site and how to get information. It also should be noted that they have numerous disclaimers which should be respected because, after all, they are collecting data from outside parties on the behalf of investors but obviously cannot be held accountable for that data.
I don't play with individual bonds; my portfolio requires more diversification.ReplyDelete