Best Strategy for Getting Good Bond Prices?

- W
- W
  
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posted
14 years ago

Thu, Jul 23, 2009 11:04 PM

FINRA shows intra-day trade data for different CUSIPs, marking each trade as reported by the seller, the buyer, or dealer-to-dealer. I included a sample out of a bond that traded today between $89.4 and $91.1 below my signature. When I call my brokers and I get quotes of $94 to $95.8. So it's clearly frustrating that even when the market has a lot of liquidity on a given day the brokers give really lousy quotes. At end of day with the bond trading at $89.50, someone quoting me $95.8 is stealing 6.5% of my equity as their commission. It's just not acceptable. There has to be a better way.

If you want better price executions on bonds, who are the brokers who are most likely to give that to you?

Is there a better way to trade these? As a retail investor, what strategies can you employ?

If your account gets to a certain size (and what is that size?) do you get additional options for better pricing?

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- dapperdobbs
  
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posted
14 years ago

Sat, Jul 25, 2009 3:23 PM

On Jul 23, 7:04 pm, "W" wrote: [snip for brevity]

[snip]

First, have you told your broker you have quotes at $89.50 and asked him why he is quoting you $95.80?

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- dapperdobbs
  
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posted
14 years ago

Sun, Jul 26, 2009 2:54 AM

On Jul 25, 2:54 pm, "W" wrote: [snip]

Thanks - that's informative. In the 1990's I had some munis neighboring CA's temporarily infamous Orange County. The bid was 75 and I tried to buy. My broker told me the asked was 97 and "we have no inventory." By contrast, in the 1980's munis were retail-friendly (always a prospectus, reliable bid/ask, etc,). Two years ago I had to special request prospectii on variable rate bonds, with limited success.

Concentrations of money are the clowns who crash markets and make the environment dangerous (e.g. the recent 'financial crisis'). My take on it is: individuals have become literally "convinced" investing is too complicated, and hand over money to "funds" (managers, "private equity," banks, etc.). My concern is that, as goes with history, apathy is leading to destruction of free markets.

The SEC handles stocks - I do not know if they handle bonds. IMO the issues here are very serious and should be addressed. Even in "private placements" advisors and underwriters (read, "investment banks") walk away with millions in their pockets. (Btw, the situation with IPO's is much worse, costing issuers half their capital through what I call "gifting" to the tiny minority of concentrated funds.)

It's a big topic and requires work. I will check with my broker, find the regulatory agency, and inquire, but I fear a good job will require tracing back the regulations to those which allowed the changes, and my guess - it is when Glass-Stegall was rescinded (over several years in the 1990's). IMO, we've been attacked by investment bankers, and we have lost.