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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
|
3.13% |
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S&P National 0-5 Year Municipal Bond Index
|
0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
|---|
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Bond Bubble Double Trouble |
The Motley Fool - Jan. 24, 2011 - By Chuck Saletta
Standard textbook financial theory says that bonds are less risky than stocks. The basic reasoning is that bonds have priority in the overall corporate pecking order.
If a company stops paying dividends on its stock, shareholders generally have no choice but to suck it up. But if that same company stops making its bond payments, the bondholders have far more recourse -- even up to taking control of the entire company.
When textbook logic breaks
That makes sense, and purely from the perspective of cash flow reliability from bond offering to maturity, those textbooks are absolutely correct. The problem is that bonds can still be risky investments. And when market conditions are just right (or is that "just wrong"?), the risk can be substantial, indeed.
First and foremost, bonds are exposed to interest rate risks. The higher interest rates go, the less existing bonds with fixed coupon payments are worth. The longer the remaining term and the lower the bond's coupon rate, the bigger the impact of interest rates.
Additionally, bonds are exposed to credit quality risks. If the market or a ratings agency determines that the company that issued the bond is riskier than originally believed, a bond's price can drop as new investors demand higher future returns.
If both happen at the same time -- overall rates go up as a company's credit quality deteriorates -- that spells double trouble for bondholders. Investors can see the current value of their existing bonds deteriorate from both factors, and the result won't be pretty.
What can happen?
Individual bond prices move in response to interest rate changes based on something known as "modified duration." The bigger a bond's modified duration, the further the bond will fall if rates for that company's debt rise through general market pressures, rating downgrades, or both. While interest rate changes don't affect an existing fixed-rate bond's cash flows, that's not much comfort for any investor who may be interested in selling a low-coupon bond anytime before it matures.
For the complete article.
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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