Who issues bonds and how can I buy them?
From FinancialPlanning
Contents |
Issuers
The bond market is very large, representing $26.7 trillion in outstanding debt in the United States as of September 30, 2006, according to the Bond Market Association. Because new bonds are issued regularly by thousands of municipalities and corporations, there are many more bonds than there are individual stocks. Issuers include:
- US Treasury
- US Governmental Agencies - e.g., GNMA, FNMA, FHLB
- Municipalities and related projects (stadiums, airports)
- Corporations
- Foreign Governments
- Foreign Corporations
Methods of Purchase
Savings Bonds
Savings bonds are a special case, because they are not marketable securities (they cannot be bought and sold on a secondary market). They can be purchased through your local bank or through Treasury Direct, the transaction web site of the United States Treasury Department.
US Treasury Bonds
US Treasury bonds may be purchased through Treasury Direct, the transaction web site of the United States Treasury Department, but only at original issue. Many more bonds are available on the secondary market through an account with a brokerage firm, including online and discount-brokerage firms. The cost of buying or selling Treasury bonds is usually very low, because they are so actively traded.
US Governmental Agencies
Many agency bonds are difficult to purchase, because they are bought and sold in larger denominations by institutional investors. Those that are available are typically purchased through a brokerage account.
Municipal Bonds & Corporate Bonds
Municipal Bonds and corporate bonds, both at original issue and from the secondary market, are typically bought and sold through brokerage accounts. Unlike US Treasury bonds, the transaction costs when trading municipal and corporate bonds can be quite high, especially when selling a bond that is infrequently traded. While most municipal bonds are owned by individuals, corporate-bond inventory is limited, because many of them are traded only in very large denominations so cannot realistically be purchased by individual investors.
Foreign Bonds
Individual investors typically own foreign bonds only through mutual funds, because of the difficulties in buying and selling them.
Mutual Funds
Instead of buying bonds directly, you may instead decide to buy mutual funds that invest in individual bonds. This topic has its own set of FAQs in the bond section of the Investments page.
