By M. Choudhry
Bonds are an essential component of the worldwide capital markets and are crucial for any investor's portfolio. during this e-book top specialist Moorad Choudhry demystifies bonds as soon as and for all. This consultant explains, in an easy, transparent type, the significance of bonds and why all inner most traders should still contain them as a part of their funding method. Many bonds supply safe returns at a decrease danger than equities. Readers will achieve perception into the benefits of conserving bonds and why they need to constantly shape a part of any reductions portfolio. overlaying, between different issues, govt bonds, the yield curve and what drives the industry, in a simple, obtainable kind, this e-book is a needs to for somebody who desires to undertake a legitimate funding procedure.
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Extra info for Bonds: A Concise Guide for Investors
Sample text
The dividend on a share is not guaranteed. ᔢ The tax treatment of bonds sometimes differs from that of shares. For instance, UK gilts are not subject to capital gains tax in the way that shares are. Shares are generally recommended as being for the long term, and for those investors who do not require a regular income on their investments. The main return for shareholders is the capital gain that results when the share price rises. Bonds however can combine income with an element of capital gain, and are less price volatile than shares, so they are suitable even for those who might be commonly expected to be share investors.
Liquidity is a general term used here to mean the ease with which a market participant can trade in or out of a position. If there is always a ready buyer or seller for a particular bond, it will be easier to trade in the market. So we know now the following: ᔢ If the yield rises, the price of the bond goes down. ᔢ If the yield falls, the price of the bond goes up ᔢ If the price of the bond is below par (100), the coupon is lower than the yield, and if the price is above par, then the coupon is above the yield.
Currency Bonds can be issued in virtually any currency. The largest volume of bonds in the global markets is denominated in US dollars; other major bond markets are denominated in euros, sterling and Japanese yen. There are also liquid markets in Australian, New Zealand and Canadian dollars, Swiss francs and other major currencies. BOND ISSUERS The core of any domestic capital market is the government bond market, which also forms the benchmark for all other borrowing. 2 illustrates UK gilt price and yield quotes as listed in the Financial Times for 25 January 2006.