Bonds Value Guides

There are more methods for analyzing bonds than there are bonds, or so it seems. Even so, some are clearly essential to evaluating risk and potential returns. We’ll look at a few here.

Because of some fixed characteristics - par (face value, repaid at maturity), coupon (interest rate, percentage paid in semi-annual payments on the par) and maturity (date principal is repaid) - predicting bond values and risk with some confidence is as much science as art.

Life is risky. Every day investors are faced with complex choices in the face of deep uncertainty. What to do? Look at history and realize that the odds favor the educated. One opportunity for learning comes in the form of corporate bond offers.

It’s often said that government bonds represent one of the lowest possible risks for an investor. In general, true - but much depends on which government issues them and which investor is buying.

Every bond carries some risk that the issuer will default on repayment of the principal or suspend interest payments. Once that risk is measured (see ‘Measuring Risk’ elsewhere in this series), then what?