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Introduction:This article is all about bonds and in general the fixed income markets. To start with, a bond is effectively an IOU from one person to another. There is a legal obligation from the issuer to repay the investor. If this is not fulfilled the issuer default on his debts.Components:There are many components in bonds that you should be familiar with, even when it comes to trading Forex. Firstly;Principal : Also commonly known as the Par value is the value that the issuer will have to pay back to the lender upon maturity. This ranges from $1,000 to $100,000 depending on the type of bond. This is also commonly the same value that the investor lends to the country or corporation.Price : This aspect changes just as the price of a stock would, upon issuance price is normally  100. Throughout the life of the bond this price may vary due to demand for the bond. Any price above 100 is seen to be trading at a premium and anything below is at a discount. Normally it is quoted as the "clean" price, or the price without any interest that has accrued. If there is a $10,000 bond and the price falls from 100 to 90, it costs you $9,000 to buy an IOU for $10,000. This means that if you hol…
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AdrianWS avatar
AdrianWS 19 June

Spanish 10 year's caught a decent bid today forcing yields down 17 Bps at one point, bids seen from arbitrageurs trading compression movements with CDS'. - http://www.bloomberg.com/quote/GSPG10YR:IND

Risk on across market but all rest on QE hopes. All things considering, do you personally value the SP500 at 1350 without QE, I think the answer is no, seems to be pricing in QE to me.

One key factor though is the diminishing returns of each successive intervention and that suggests QE3 will last for less than 1 month and give no more than 100 points. we will see.

scramble avatar
scramble 20 June

Another great article! Very well explained one of the most important (and very actual) aspects involved in trading financial markets! Well done!

AdrianWS avatar
AdrianWS 26 June

RBS say long core, short periphery into the weekend. as it stands 10yrs of European bonds are : 9.65% - Portugal // 6.72% -Spain // 6.06% - Italy // 1.52% - Germany // Netherlands - 2.06% // Finland - 1.9%.

Some pretty sizeable moves in these yields in the past few days, will be interesting to see where it goes from here.

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A lot of individuals delve into the trading world with the misconception that there is a highly positive correlation between intelligence and trading success. It is nothing short of an axiom that trading is a very intricate profession- a mystery that can only be unraveled on complete analysis. In addition, the grandiloquent terms associated with trading, especially in its fundamental aspect, such as quantitative easing, intervention, down grade, inflation, Gross domestic product, demand and supply, etc, help to bolster the above thesis. Yes, a trader needs to be mentally alert in order to successfully analyze currency pairs; however, success in trading requires a whole lot more. It is important to note that individuals who have attained “financial maturity” tend to be more successful in the art of trading.  
Financially mature traders are the wise ones that recognize the worth of their equity. They understand the effects of loss and profit on their capital; therefore, they put all aspects of trading into perspective. As a result, they pay close attention to key aspects of trading such as risk management, money management, and psychology. With this type of approach, they stand the c…
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Rambofx avatar
Rambofx 4 Dec.

Good

doctortyby avatar

So the main idea is that you have to be financialy free to be successful in trading?... what about gaining this freedom through Trading itself?... don't you think it is possible? +1

ritesh avatar
ritesh 10 Dec.

Nice article, a must read I'd say. keep more coming +1

skytrader avatar
skytrader 15 Dec.

additonally he needs a good portion of insticnt and also the ability to re-evaluate his opninion each single second! nice article. thanx.

skytrader avatar

happy new year!

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