Analysing the Bond Market
How do I analyse the bond market?
Investing and trading in retail bonds is similar, yet different to the stock market. Just like choosing a stock counter, the process of deciding which bond to buy requires some analysis. The BPAM data provides you with the key building blocks to begin your analysis.
Here are some basic steps as a guide to anyone starting out in retail bonds:
- Determine your own investment horizon, risk appetite and funds available.
- Study the market trends (with the BPAM Bond Index Series).
- Study the yields/returns of the market (with the BPAM yield curves).
- Study the bond you are interested in (coupon rate, issuer, maturity, yield, price offered, research papers).
- Perform a price/yield conversion using a calculator.
- Assess if the yield offered by the bond is attractive relative to the yield curve (include taxes and transaction costs if any).
- Execute the transaction with your broker. Confirm the price and proceeds payable tally with the calculator.
Can I look at OTC bond market data to analyse retail bonds?
Yes, you must. Even though retail investors cannot participate in the OTC (wholesale over the counter) market directly, they should monitor the movements of the OTC bond market. This is because retail bonds are affected by the same factors as those in the OTC market and are likely to move in the same manner.
Yes, you must. Even though retail investors cannot participate in the OTC (wholesale over the counter) market directly, they should monitor the movements of the OTC bond market. This is because retail bonds are affected by the same factors as those in the OTC market and are likely to move in the same manner.
The OTC market will most likely react much faster as it is dominated by institutional investors (banks, insurance companies, asset managers) and hence can provide important signals about the movement of retail bonds.
The BPAM Data covers the entire OTC market and thus provides the timely and comprehensive data as a reference point to guide retail investors on what could happen in the retail market.
