How To Analyze Corporate Bonds With Bloomberg Terminals: Valuing Corporate Bonds
  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

How To Analyze Corporate Bonds With Bloomberg Terminals: Valuing Corporate Bonds

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

  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
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bond Valuation

    A technique for determining the fair value of a particular bond. ...
  3. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
  4. Dollar Price

    The percentage of par, or face value, at which a bond is quoted. ...
  5. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  6. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
RELATED FAQS
  1. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
  2. What risk factors should investors consider before purchasing a callable bond?

    Understand the difference between callable and non-callable bonds and consider all the various risk factors associated with ... Read Answer >>
  3. What forms of debt security are available for the average investor?

    Discover the various different types of debt securities, issued by government entities or corporations, that are available ... Read Answer >>
  4. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
  5. Why do companies issue callable bonds?

    Learn how callable bonds work, how they include an embedded call option, and understand the additional risks that callable ... Read Answer >>
  6. Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate ... Read Answer >>

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