Stock Market

Like stocks, bonds are also listed in tables in the financial section of newspapers. Bond tables are useful for two reasons:

If you own a bond and want to sell it, chances are the price is going to be different than what you paid for it. You need to know how different.

Most bonds are purchased from the secondary market. The table allows you to research and compare current yields for various issues.

A bond table is a handy way to adjust to changes in bond yields and/or prices. When bonds are first issued, they are priced to sell at par, or 100. As they trade, their price moves above or below 100, depending on the demand for the bonds. If a bond's price falls below 100, it is considered to be selling at a discount. If it rises above 100, it is selling at a premium. Bonds trade in "32nds"; 1/32, 2/32 price movements. For example, in May of 2002, the Treasury sold five-year notes that mature in May, 2007 and pay 4.375 percent interest. By August 1, 2002, the notes were trading at a premium price of 104 % with a yield of 3.37 percent.

If the yield fell 30 basis points (.30 percent), what would the price of the bond be? Looking in a bond yield book (your broker or banker will have one), you would look down the yield scale to 3.07 percent and then over to 4 years 10 months to maturity to read a price of 105.87. Alternatively, if the yield increased 30 basis points, you would look up to find the price of 103.12. Know the price but want to find the yield? Just reverse the process!

TIP: Par is the original price of a bond, note or bill. It is also the amount that the security will pay back at maturity and is referred to as "100" (e.g., a $1,000 par value bond that increased in price to $1,100 due to a fall in interest rates would be quoted as "110" in the bond tables). Between issuance and maturity, a fixed-income security may be bought and sold, with its price rising or falling depending on interest rates and other factors. If a bond's price is over 100, the bond is said to be trading at a premium. If the price falls below 100, the bond is trading at a discount.