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BONDS 101 PUBLIC FUNDS INVESTING

BONDS 101 PUBLIC FUNDS INVESTING. Prepared for: Presented by:. Paul Jarvis Managing Director 206-365-3000 877-707-7787. Member SIPC and FINRA. Source: Bloomberg. BOND BASICS - WHAT IS A BOND?. $100 1 Year 10.00% = 110 10%. BOND BASICS - WHAT IS A BOND?.

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BONDS 101 PUBLIC FUNDS INVESTING

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  1. BONDS 101PUBLIC FUNDS INVESTING Prepared for: Presented by: Paul Jarvis Managing Director 206-365-3000 877-707-7787 1 Member SIPC and FINRA.

  2. Source: Bloomberg 2

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  4. BOND BASICS - WHAT IS A BOND? $100 1 Year 10.00% = 110 10% 4

  5. BOND BASICS - WHAT IS A BOND? 5

  6. BOND BASICS - MARKET RATES WENT DOWN TO 8% 6

  7. BOND BASICS - SO, THE PRICE OF THIS BOND WENT UP... 7

  8. BOND BASICS - MARKET RATES WENT UP TO 12% Interest rates for similar bonds went up to 12%. 8

  9. BOND BASICS - SO, THE PRICE OF THIS BOND WENT DOWN... 9

  10. BOND BASICS - WHEN RATES GO DOWN, PRICES NECESSARILY GO UP Bond Maturity Value $110 10

  11. BOND BASICS The difference between 1.00% and 1.01% = 1 Basis Point The $ value of 1 Basis Point on $1 million Invested for 1 year = $100 In other words: 1 BP/$1MM/1 Year = $100 1 BP/1MM/6 Months = $50 11

  12. BOND BASICS - A TYPICAL BOND Don’t forget about interest on interest…. 12

  13. BOND BASICS - THIS BOND IS AT A DISCOUNT 13

  14. BOND BASICS - THIS BOND IS AT A PREMIUM 14

  15. BOND BASICS – SELL THE BOND BEFORE MATURITY: NO RATE CHANGE SELL RECEIVE NOTE: Actual results may vary depending on original maturity of bond and length of holding period 15

  16. BOND BASICS – SELL THE BOND BEFORE MATURITY: RATES WENT DOWN SELL RECEIVE 16

  17. BOND BASICS – SELL THE BOND BEFORE MATURITY: RATES WENT UP SELL RECEIVE 17

  18. BOND BASICS - A TYPICAL BOND THAT IS CALLABLE Yield to Call = 1.00% Yield to Maturity = 1.00% 18

  19. BOND BASICS - A TYPICAL BOND THAT IS CALLABLE WITH 3 CALL DATES Yield to Call = 1.00% Yield to Maturity = 1.00% 19

  20. BOND BASICS - A CALLABLE BOND, PRICE IS AT A PREMIUM Yield to Call = .75% Yield to Maturity = 1.85% 20

  21. BOND BASICS - A CALLABLE BOND, PRICE IS AT A DISCOUNT Yield to Call = 1.30% Yield to Maturity = .90% 21

  22. BOND BASICS - A TYPICAL BOND THAT IS CALLABLE Yield to Call = 1.00% Yield to Maturity = 1.00% 22

  23. BOND BASICS – AFTER YOU BUY A BOND…WHAT HAPPENS NEXT? Gives Verbal Order Bond Is Purchased 23

  24. BOND BASICS – AFTER YOU BUY A BOND…WHAT HAPPENS NEXT? 24

  25. BOND BASICS – AFTER YOU BUY A BOND…WHAT HAPPENS NEXT? 25

  26. BOND BASICS – AFTER YOU BUY A BOND… WHAT HAPPENS NEXT? Forwards Confirmation Wires $ 26

  27. DELIVERY VERSUS PAYMENT (DVP) IS “BEST PRACTICES” 27

  28. WWW.TREASURY.GOV, RESOURCE CENTER, DATA AND CHARTS CENTER, DAILY TREASURY YIELD CURVE RATES 28

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  30. The information provided, while not guaranteed as to its accuracy or completeness, has been obtained from sources believed to be reliable. This is for informational purposes only. Because of individual client requirements, it should not be construed as advice designed to meet the particular needs of any client. This information should not be used as the primary basis of investment decisions. Contact your financial and tax advisors before implementing any strategies outlined in this material. Member SIPC and FINRA. 30

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