1. How To Analyze Corporate Bonds With Bloomberg Terminals: Introduction
  2. How To Analyze Corporate Bonds With Bloomberg Terminals: Analyzing Corporate Bonds
  3. How To Analyze Corporate Bonds With Bloomberg Terminals: Valuing Corporate Bonds
  4. How To Analyze Corporate Bonds With Bloomberg Terminals: Trading Bonds On Bloomberg
  5. How To Analyze Corporate Bonds With Bloomberg Terminals: Conclusion

After you have evaluated the credit worthiness of a particular issuer, the next step is deciding upon an appropriate valuation for that bond. There are three good ways to do this. The first method is to look at where the bond has previously traded. This can be done by looking at trade history information on Bloomberg, which is collected from the TRACE reporting system. Typing <TDH> into your terminal will provide a listing of recent trade dates, times, and prices for a particular bond. Keep in mind that pricing can vary greatly from day to day and also by size of trade, so it is best to treat this historical pricing as indicative only.

SEE: An Introduction To Corporate Bond ETFs



In the bond market, most securities trade on a spread basis (spread represents the additional compensation an investor receives over U.S. Treasuries in return for accepting greater risk.) Therefore, the second method of valuing a corporate bond is to evaluate its spread. There are a variety of Bloomberg functions for this, but a good place to start is by typing <YAS> into the terminal. This screen allows you to change inputs such as the price of the bond, the yield of the bond, or the spread to Treasuries of the bond. You can manipulate these inputs until you reach a level at which you think the bond is attractive; this level can then be your target price when attempting to purchase bonds.



Note: If the bond you are interested in is callable, you can use the yield-to-call function (<YTC>) to determine whether you are comfortable holding that bond regardless of whether or not it is called.

The final method of valuing a corporate bond is to compare its pricing with that of its peers. For instance, you might want to compare a five-year Citigroup bond with five-year bonds issued by JP Morgan, Bank of America, and Wells Fargo. You can then use the tools described above to analyze the relative valuations of each of the issuers in order to determine if you're comfortable with the value you are receiving when purchasing the Citigroup bond.

SEE: Callable Bonds: Leading A Double Life

How To Analyze Corporate Bonds With Bloomberg Terminals: Trading Bonds On Bloomberg

Related Articles
  1. Investing

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
  2. Investing

    Bond Call Features: Don't Get Caught Off Guard

    Learn why early redemption occurs and how to avoid potential losses.
  3. Investing

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  4. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  5. Investing

    Surprise! The Best Long-term Bond Investment May Be Savings Bonds

    A 20-year Series EE savings bond pays more interest than a 20-year Treasury bond. So are government-issued long-term bonds the best bet going?
  6. Managing Wealth

    How To Analyze Corporate Bonds With Bloomberg Terminals

    Bloomberg was originally designed as a tool for bond traders, and as such it's capabilities for analyzing corporate bonds are extremely robust.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center