Strategic Bond Investor : Strategies and Tools to Unlock the Power of the Bond Market

by Crescenzi, Anthony

• ISBN13: 9780071387071
• ISBN10: 0071387072
• Edition: 1st
• Format: Hardcover
• Copyright: 2002-06-14
• Publisher: McGraw-Hill

Summary

A dynamic, equity-style approach to investing in today's bond market"Tony Crescenzi knows bonds and his book proves it. From 'Fedspeak' to Treasury buybacks,The Strategic Bond Investorhelps to explain the mysteries of the bond market and even offers tips on how to forecast interest rates. Sign me upI can always learn something new!"Bill Gross, Managing Director at Pacific Investment Management CompanyBond investing can be every bit as exciting and profitable as "playing the stock market."The Strategic Bond Investoris the first book to approach fixed-income investing from an equity-style perspective. This fast-paced book provides readers with helpful tips, tools, and strategies for tracking market sentiment, spotting market extremes, analyzing volume and liquidity, and dozens of other techniques that wereup until nowlimited primarily to the equity markets.The Strategic Bond Investorreveals a dramatic new approach for using bonds to balance portfolios while grabbing profit opportunities as they present themselves. It represents a new style of bond investing, bold yet risk-conscious, that is long overdue for today's transformed market environment. Investors looking to diversify their portfolios will discover: Key economic releases and how they influence bond prices Popular fixed-income portfolio management strategies Best-performing bonds in a variety of economic circumstances

Author Biography

Anthony Crescenzi is chief bond market strategist at Miller Tabak & Co., and founder and daily market analyst of Bondtalk.com. Widely respected by the nation's top institutional investors, Crescenzi is one of today's most visible and influential bond market commentators. He makes frequent appearances on CNBC, CNNfn, and Bloomberg Television and is regularly quoted in The Wall Street Journal, Barron's, The New York Times, and other national periodicals.

Table of Contents

The Importance of the Bond Market	1	(16)
The Bond Market Is the Dog That Wags the Tail	2	(1)
The Bond Market Is Where Interest Rates Are Set	2	(2)
Interest Rates Affect Personal Finances	4	(2)
Credit Cards	6	(1)
The Profound Impact of Interest Rates on the Stock Market	7	(3)
The Bond Market's Impact on the Economy	10	(1)
The Bond Market's Impact on the Interest-Rate-Sensitive Sectors of the Economy	11	(2)
Why the Performance of the Economy Is Important to You	13	(1)
The Bond Market Impacts the Formation of Capital	14	(1)
The Bond Market and Politics	15	(1)
Summary	16	(1)
The Composition and Characteristics of the Bond Market	17	(36)
Bonds That Helped Save the World	18	(1)
Today's Bond Market	19	(1)
Specialization in the Bond Market	19	(1)
Primary Dealers Facilitate Efficiency in the Bond Market	20	(3)
The Bond Market's Size, from Head to Toe	23	(1)
There's No Bigger Market	24	(1)
Sizing Up the Market	25	(19)
Liquidity: A Measure of the Vibrancy, Depth, and Efficiency of Market	44	(3)
Market Depth	47	(1)
Price Transparency	48	(2)
Summary	50	(3)
Bond Basics: Building Blocks and Warning Labels	53	(16)
Bonds: What Are They?	55	(2)
The Indenture: The Contract between the Bond Issuer and the Bondholder	57	(1)
Coupon Rate: Not for Clipping Anymore	58	(1)
Call and Refunding Provisions: A Call Bond Investors Would Rather Not Take	59	(1)
Yield-to-Call and Yield-to-Worst: Important Footnotes	59	(1)
Put Provision	60	(1)
Current Yield	61	(1)
Yield-to-Maturity: Not Necessarily	61	(2)
Accrued Interest	63	(1)
Basis Points: Bond Lingo	63	(1)
Duration: A Key Gauge of a Bond's Price Volatility	64	(3)
Summary	67	(2)
Types of Bonds	69	(24)
U.S. Treasuries	70	(7)
Corporate Bonds	77	(4)
Government Agency Securities	81	(4)
Mortgage-Backed Securities	85	(3)
Municipal Bonds	88	(3)
Holders of Fixed-Income Securities	91	(1)
Summary	91	(2)
Risks Facing Today's Bond Investors: Beware but Be Not Afraid	93	(22)
Market, or Interest Rate, Risk	94	(2)
Reinvestment Risk	96	(2)
Event Risk	98	(6)
Sector Risk	104	(1)
Call or Prepayment Risk	105	(2)
Liquidity Risk	107	(1)
Credit or Default Risk	108	(1)
Yield Curve Risk	109	(1)
Inflation Risk	110	(1)
Currency Risk	111	(1)
Hedge Risk	111	(1)
Odd-Lot Risk	112	(1)
Summary	113	(2)
Don't Fight the Fed: The Powerful Role of the Federal Reserve	115	(32)
The Fed's Raison d'Etre: Financial Stability across the Land	116	(1)
From the Mint to the Grocery Store: How the Fed Affects the Economy	117	(1)
Take a Closer Look at the Buck	118	(1)
How Monetary Policy Changes Affect the Economy	119	(2)
The Fed Affects More Than Just Interest Rates	121	(4)
Structure of the Fed	125	(1)
FOMC Meetings: The Great Debate	126	(3)
The Fed's Impact on the Bond Market: Resounding	129	(6)
Don't Fight the Fed: Follow It	135	(3)
Trust the Fed	138	(3)
The Art of Fed Watching	141	(4)
Summary	145	(2)
The Yield Curve: The Bond Market's Crystal Ball	147	(22)
Three Reasons to Follow the Yield Curve	149	(2)
A Crystal Ball Indeed	151	(3)
Three Main Reasons the Treasury Yield Curve Gets the Most Attention	154	(2)
Traditional Explanations for the Shape of the Yield Curve	156	(1)
The 10 Biggest Factors That Affect the Shape of the Yield Curve	157	(9)
Summary	166	(3)
Real Yields: Where Real Messages Can Be Found	169	(16)
Historical Perspective on Real Yields	170	(4)
Factors That Cause Real Yields to Fluctuate	174	(5)
Three Risks of Using Real Interest Rates as Indicators of Future Economic Performance	179	(2)
When Negative Real Interest Rates Are Necessary	181	(1)
Summary	182	(3)
The Five Tenets of Successful Interest Rate Forecasting	185	(34)
The Five Core Elements of Successful Interest Rate Forecasting	186	(1)
Monetary Policy: Fed Talk Abounds	187	(5)
Inflation Expectations: A Worry in Constant Flux	192	(6)
The Pace of Economic Growth: How Much Is Too Much?	198	(4)
Secular versus Cyclical Influences: Know the Force That's with You	202	(5)
The Market's Technical Condition: Fundamentally Important in Forecasting Interest Rates	207	(1)
Key Technical Factors That Influence the Bond Market	208	(6)
Technical Analysis	214	(4)
Summary and Conclusion	218	(1)
From Tulips to Treasuries: Tracking Market Sentiment to Forecast Market Behavior	219	(22)
The Bond Market Goes to Extremes Too	222	(1)
Is the Market Long or Short? The Answer Could Determine Your Next Trade	223	(1)
For Extreme Market Sentiment to Reverse, Catalysts Often Are Needed	224	(1)
The Put/Call Ratio	225	(4)
The Commodity Futures Trading Commission's Commitment of Traders Report	229	(2)
Aggregate Duration Surveys	231	(3)
The Spread between 2-Year T-notes and the Federal Funds Rate	234	(3)
Other Useful Indicators of Sentiment	237	(1)
Summary	238	(3)
Using the Futures Market to Gather Market Intelligence	241	(16)
Futures Provide Significant Market Information	242	(13)
Summary	255	(2)
Credit Ratings: An Essential Tool for Bond Investors	257	(20)
The Ratings Cut an Investor's Risk	258	(1)
The Rating Agencies	259	(2)
The Ratings System	261	(1)
The Ratings Categories	262	(4)
How Credit Ratings Affect a Bond's Yield	266	(2)
The Impact of Ratings Announcements	268	(1)
How Credit Ratings Affect Liquidity, Quote Depth, and Bid-Ask Spreads	269	(1)
Methodology Used to Determine Rating Assignments	269	(5)
Credit Ratings: A Must-Have for Every Fixed-Income Toolbox	274	(1)
Summary	274	(3)
The Internet: The Bond Market Finally Gets a Marketplace of Its Own	277	(16)
Bonds Are Already the Biggest Thing on the Web	278	(1)
Electronic Trading	278	(6)
Increased Market Transparency	284	(1)
Increased Availability of Market Information and Research	285	(2)
Underwriting and Bond Issuance	287	(2)
Added Convenience and Reduced Cost of Purchasing Treasuries and U.S. Savings Bonds	289	(2)
Summary	291	(2)
How Interest Rates Have Shaped the Political Landscape	293	(18)
Economic Issues Have Been Core Political Issues since the Revolution	294	(1)
The Great Depression Sparked a Sea Change in Politics	295	(2)
Interest Rates and Politics in the Modern Era	297	(12)
Summary	309	(2)
Utilizing Economic Data to Improve Your Investment Performance	311	(10)
Forecasting Economic Data: Numbers Do Not Lie	314	(2)
Be Flexible: Investors Change Their Focus Often	316	(1)
Learn the Survey Methodologies to Enhance Your Forecasting Abilities	317	(1)
Summary	318	(3)
Appendix Handbook of Economic Data: Power Tool for Investors	321	(64)
Business Inventories	321	(2)
Chicago Purchasing Managers Index	323	(2)
Construction Spending	325	(2)
Consumer Confidence Index	327	(2)
Consumer Credit	329	(3)
Consumer Price Index	332	(2)
University of Michigan Consumer Sentiment Index	334	(2)
Durable Goods Orders	336	(3)
Employment Situation	339	(3)
Employment Cost Index	342	(4)
Existing Home Sales	346	(2)
Factory Orders	348	(2)
Gross Domestic Product	350	(4)
Housing Starts	354	(2)
Industrial Production and Capacity Utilization	356	(2)
Initial Jobless Claims	358	(3)
Index of Leading Economic Indicators	361	(2)
Institute for Supply Management Report on Business	363	(2)
Institute for Supply Management Nonmanufacturing Index	365	(2)
New Home Sales	367	(3)
Personal Income and Consumption	370	(2)
Philadelphia Fed's Business Outlook Survey	372	(2)
Producer Price Index	374	(2)
Productivity and Costs	376	(3)
Retail Sales	379	(2)
U.S. Trade Balance	381	(4)
Index	385