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Bond Investing 101 - How to Invest in Bonds, Funds and ETFs

How to Invest: Investing 101

Bond investing can range from simple U.S. Savings Bonds to complex corporate convertible securities. For the average investor, successful bond investment likely falls somewhere in between.
The articles and links below should help you on your path to becoming a successful bond investor.

Treasury Bonds

>> Which 30-Year Treasury Bond Does Everyone Quote?
When newscasters like those on CNBC report price changes and yields for "the 30-year Treasury bond," exactly what bond -- or is it a group of bonds -- are they reporting on?

>> How Does the Fed Funds Rate Affect Treasury Bills?
What happens to Treasury bill yields when interest rates go up? Do they react the same way as bonds?



Municipal Bonds


>> Zero Coupon Municipal Bonds: Tax Treatment
Is the buyer of a zero-coupon muni held to maturity ever subject to federal taxes (other than the alternative minimum tax)?

>> What is the MOB (Municipal Over Bond) Spread?
The MOB spread is the difference in price between the municipal bond futures contract listed on the Chicago Board of Trade and the Treasury bond futures contract listed on the same exchange.

>> Calculating Bond Yields: Municipal vs Taxable
In order to do an apples-to-apples comparison between the yield on a municipal bond and a taxable bond, you have to calculate either the taxable-equivalent yield of the muni bond or the after-tax yield of the taxable bond.



Advanced Bond Concepts


>> What is Bond Duration?
Duration gives investors a way to compare bonds with different maturities and coupons.

>> What is Bond Convexity?
If duration describes the approximate relationship between price and yield, convexity describes the actual relationship between price and yield.

>> How to Measure a Bond's Interest-Rate Sensitivity
Duration and average life are different ways of measuring the interest-rate sensitivity of a debt security.



Taxation of Bonds

>> Do Bonds Bought at a Premium Produce Capital Losses?
Since a bond bought at a discount generates a capital gains tax liability at maturity, does it generate a capital loss deduction at maturity if bought above par?



Bond ETFs and Funds

>> ETFs vs. Mutual Funds: High-Yield Debt
For long-term investors, mutual funds that invest in high-yield debt outperform comparable ETFs.

Best Bond ETFs

Best Bond Mutual Funds

U.S. Savings Bonds

U.S. Bond Interest Rates

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