Bond Quote

Updated on January 5, 2024
Edited byRaisa Ali
Reviewed byDheeraj Vaidya, CFA, FRM

What is a Bond Quote?

A bond quote refers to the bond’s price agreed by buyer and seller during a determined timeframe, generally at the time of trading. The value is presented on a scale of 0 to 100, representing a percentage of $1,000 or $100, the usual face value for a single bond.

The quote reflects the most recent price or market price at the time of trading. When the quoted price is composed of accrued interest, the price is known as the dirty price. Conversely, a bond’s clean quote or a clean price indicates that the price is independent of accrued interestAccrued InterestAccrued interest formula calculates the interest earned or payable on the debt over one accounting period. Formula = loan amount * (yearly interest/365) * time period.read more.

Key Takeaways

  • The bond quote represents the value of the bond at the time of trading, usually in terms of percentage of face value or yield.
  • If the bond having a face value of $1000 is quoted at $99, the bond trades at 99%of face value, that is $990.
  • Reading the bond quotation makes it easy to obtain more information about the investment instrument than just the current price. It may, for example, include its bid price, ask price, yield, maturity, coupon rate, and spread.
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How to Read a Bond Quote?

Bond quotes are usually represented as a percentage of the face value or in terms of yield. Bond prices are sensitive to various factors like credit rating, market interest rates, and supply and demand forces. Quotes reflecting the market value reveal whether they are trading at a premium or discount.

Percentage of Par value: Generally, bondsBondsBonds refer to the debt instruments issued by governments or corporations to acquire investors’ funds for a certain period.read more have prices based on their par value, also known as face value. It is, essentially, the value of the bond stated at the time of its issuance, which is often issued at $1000 per one unit of the bond or $100 in a few cases. So, if the financial instrument’s face value is $1000 and currently selling at a quote of 90 indicates that it is trading at 90% of its face value, that is $900. Consider another example:

  • The price is quoted as 95.50.
  • The bond’s face value is $1000.
  • It is selling at 955.

It means that the bond is trading at 95.5% of its face value.

Fractions: Sometimes, bond price takes the form of fractions. Usually, corporate bonds are represented as increments of 1/8 and government bondsGovernment BondsA government bond is an investment vehicle that allows investors to lend money to the government in return for a steady interest income.read more in increments of 1/32. Thus, in the previous example, it is correct to define the value as 95.5 or 95 16/32. A value such as 97.75, for instance, would be described as 97 6/8 or 97 24/32. 

Yield: The yield value is informative about the actual profit resulting from the investment. It indicates the potential income or the rate of returnRate Of ReturnRate of Return (ROR) refers to the expected return on investment (gain or loss) & it is expressed as a percentage. You can calculate this by, ROR = {(Current Investment Value – Original Investment Value)/Original Investment Value} * 100read more derived from holding the bond until maturity. Yield and bond prices are inversely related. When the market interest rate increases, yield increases, and bond price decreases, and vice versa. Using yield terms like yield to maturityYield To MaturityThe yield to maturity refers to the expected returns an investor anticipates after keeping the bond intact till the maturity date. In other words, a bond's returns are scheduled after making all the payments on time throughout the life of a bond. Unlike current yield, which measures the present value of the bond, the yield to maturity measures the value of the bond at the end of the term of a bond.read more (YTM) makes the comparison of different bonds less complex.

Bond Quote

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Source: Bond Quote (wallstreetmojo.com)

By reading a bond quote, it is easy to discover more information other than the current price. For example, it may include its bid price, ask price, yield, maturity, and spread. However, amateur investors may feel perplexed while reading it because of their presentation.

#1 – Bid & Ask Prices

The “bid” and “ask” prices are elementary concepts when looking for a bond in a secondary marketSecondary MarketA secondary market is a platform where investors can easily buy or sell securities once issued by the original issuer, be it a bank, corporation, or government entity. Also referred to as an aftermarket, it allows investors to trade securities freely without interference from those who issue them.read more. Bid pricesBid PricesBid Price is the highest amount that a buyer quotes against the “ask price” (quoted by a seller) to buy particular security, stock, or any financial instrument. read more are the highest price that investors are willing to pay for the investment during a trading day, while ask pricesAsk PricesThe ask price is the lowest price of the stock at which the prospective seller of the stock is willing to sell the security he holds. In most of the exchanges, the lowest selling prices are quoted for the purpose of the trading. Along with the price, ask quote might stipulate the amount of security which is available for selling at the given stated price.read more are the price at which the seller is ready to trade the bond.

#2 – Spread

The difference between the bid and ask prices is known as the bid-ask spread. It is usually insignificant, particularly for liquid assetsLiquid AssetsLiquid Assets are the business assets that can be converted into cash within a short period, such as cash, marketable securities, and money market instruments. They are recorded on the asset side of the company's balance sheet.read more, but the value will be high if a bond is illiquid.

#3 – Coupon Rate

The coupon rateCoupon RateThe coupon rate is the ROI (rate of interest) paid on the bond's face value by the bond's issuers. It determines the repayment amount made by GIS (guaranteed income security). Coupon Rate = Annualized Interest Payment / Par Value of Bond * 100%read more represents the interest rate stated at the time of bond issuance. The issuer is liable to pay the interest to the bondholder until maturity. The fixed interest payment occurs in regular intervals like annually or semiannually until maturity.

#4 – Maturity

Maturity itself is another essential piece of information. It represents the date at which the bondholder will receive the principal amount.

Practical Example of Bond Quotes

For better understanding, the concept, consider the following example and assume data pertains to U.S. Treasury Quotes.

MaturityCouponBidAskedChgAsked Yield
2/15/20502.000101.0120101.03200.79001.949

The first column contains the bond’s maturity date, indicating which investors get the principal amount. The next column shows the coupon rate, the fixed interest rate stated at the time of bond issue, and based on which the interest payment occurs in regular intervals. It is followed by columns for bid price and ask price. Figures under Chg head represent the difference between the current price and the previous day’s price. Finally, the last column denotes the asked yield indicating the yield on the security or the yearly percentage return that the buyer will earn if the bond is acquired at the “ask price” on the day of the quotation and owned until maturity.

Frequently Asked Questions (FAQs)

What does bond mean in finance?

Bonds are financial instruments in which an investor loans money to a firm or government for a specified length of time in exchange for periodical interest payments. When the bond matures, the bond issuer repays the investor’s money.

How do you find the price of a bond quote?

Find the product derived by multiplying the quoted percentage by the par value of the financial instrument. For example, corporate bonds usually have a $1,000 face value. Therefore, multiply a corporate bond quote of 90.55 by $1,000 to find the bond’s dollar price, which comes to $905.50.

How do you read a bond quote price?

They are displayed as a percentage of the bond’s face value or as a dollar amount. Furthermore, corporate bond quotes are stated in 1/8th increments, whereas government bonds are quoted in 1/32nd increments. Municipal bonds can be offered in dollars or terms of yield to maturity.

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