The Bond Book: Everything Investors Need to Know about Treasuries, Municipals, GNMAs, Corporates, Zeros, Bond Funds, Money Market Funds, and More

by Annette Thau

In today’s volatile financial environment, growing numbers of investors are looking to flee the stock market in search of safer ground. While the bond market has often been a “safe haven,” confusing new bonds and bond funds make it increasingly difficult for unfamiliar investors to choose the correct fixed income investments. The Bond Book provides investors with the information and tools they need to make bonds a comforting, important, and profitable component of their portfolios. Thoroughly revised, updated, and expanded from its bestselling first edition, this all-in-one sourcebook includes: *A new section on using the Internet to research, buy, and sell bonds *A new chapter devoted to increasingly popular foreign bonds *Detailed information on the inflation-linked Treasury bonds *Explanation of the new categories of bond funds *Tips on how to evaluate and buy bond funds

Genres: Finance, Economics, Business, Nonfiction, Money, Reference, Personal Finance

394 pages, Hardcover

First published November 15, 1991

Reviews

[Lgordo · Rating 5 out of 5]

I foolishly thought to save $10 by getting the older edition. After all, bonds are these boring things for retirees, right? Well I've been schooled. I keep wanting her take on more recent events (sub-prime mortgages anyone?) So I may have to order the newer edition and read it all over again.

This book will give you a thorough grounding on what bonds are, how they work, and their use in investing. You'll be prepared to do further legwork on your own, because it turns out bond aren't so boring after all.

[Pawel Dolega · Rating 5 out of 5]

Very good introduction and overview of most popular bond / debt / fixed income instruments. It covers not only Treasuries, Munis but also Fannie Mae / Freddie Mac backed mortgage bonds or CDs (it goes even further to instruments like CMOs etc). Even if you know roughly how bonds work you will still learn a lot from this book (my impression is that many people think: bonds == treasuries).

I felt that from individual, part-time investor it covers most of the ground that you may need. I do have somewhat more extensive experience with financial instruments (relatively, as for someone who is not professionally in the finance industry) so it is hard to judge for me how easy it would be to digest all all this information for someone without (or with short) prior investment experience. I felt some chapters are easier to grasp than other, but then again, so are the related financial instruments (e.g. CMOs are necessarily more complicated than treasuries).

Lat but not least I think this book does a truly terrific job with fighting the common preconception that bond instruments are by definition a safe harbor in the investment landscape (like stocks are risky, bonds are safe). If you are into investment and share above opinion - read this book now.

[Papal Bull · Rating 3 out of 5]

A very good primer on all things bonds. It even explains the GNMA bonds, which confounded me. This might be the best bonds book for dummies in print.

[Bill Siefken · Rating 5 out of 5]

Great primer on Bonds

Not a big fan of bonds as an investment, but they are a critical metric in gauging the health of the broader market. This book succeeds in establishing a foundation.

[Christopher Lewis · Rating 4 out of 5]

A great way to get a base level understanding of how the bond market works in an easy to understand format. The only reason it isn’t 5 stars was the editing was abysmal and did get in the way of understanding the content at points.

[Henry · Rating 5 out of 5]

The book is more than simply about various different bond issuance. It also talks about lots of historical backdrops. Couple interesting ones:

From the preface:

... the second edition of this book was written around the year 2000. In retrospect, that was almost the last year of the great bull market in stocks that had started in 1982. At that time, pundits were proclaiming that we were in a “new era.” “Experts” were recommending that individuals invest 100% of their portfolios in equities (or perhaps keep a small percentage, say 10%, in cash), and nothing at all in bonds. The decade between 2000 and 2010 proved the “experts” wrong. Between 2000 and 2010, the stock market suffered two devastating bear markets: in 2002 and in 2008. Even though many sectors of the bond market suffered significant declines during the financial panic of 2008, for that decade, investments in many sectors of the bond market had positive returns and enabled investors to ride out a lost decade in the stock market.

On recounting people not understanding the underlying collateral MAC used when issuing its bonds:

Finally, the episode demonstrates why it pays, literally, to be very precise about exactly which revenue streams back debt service. In this instance, MAC bonds were tarred by the woes of New York City, even though they were not obligations of the city and rated higher than direct obligations of the city. And that is the main reason why even though MAC bonds represented a very solid investment from the start, their yields were so high.

On credit spreads during the Drexel junk bond era:

In November 1990, spreads between junk and Treasuries reached
1,100 basis points—a truly amazing number at the time. During 1989 and
1990, the selling of junk bonds reached panic proportions. At the height of
the panic, junk bonds were being sold for 30 to 40 cents on the dollar, with
yields-to-maturity ranging from 20% to 40%.

The panic was overdone. In early 1991, a strong rally ensued.

Amazingly, this pattern of rally, crisis, and subsequent rally did not
end at the beginning of the 1990s. During the decade of the 1990s
through the present, junk bonds have gone on several similar roller
coaster rides. Periods of outsize gains have alternated with periods of
dramatic losses. Between 1998 and 2009, severe declines occurred twice:
during the economic crisis of 1998, after Russia defaulted on its debt; and
during the financial crisis that began in 2007 and lasted through 2008.

Prior to the beginning of the most recent crisis, in 2007, spreads to
Treasuries had declined to about 260 basis points. Investors were once
again behaving as if risk had ceased to exist. But in 2008, at the height of
the financial panic, spreads to Treasuries widened to well above 25%
(2,500 basis points), a new record. Declines in the price of many junk
bonds were catastrophic, between 40% and 90%.

But once again, starting in 2009, junk rallied. For the entire calendar
year of 2009, total returns of junk bonds were stellar once more, around
40% for an index of junk bonds. This was due to two separate factors. The
first is that dividend yields of junk bonds were on average well above
25%, so interest income was very high. The second was that the extremely
steep decline in yields resulted in a significant chunk of capital gains.

Another recount of credit spread:

If you are a trader, you would want to buy corporate bonds when
they are unpopular and spreads to Treasuries are wide. The widest
spreads will always be found in the high yield (junk) bonds sector. But
remember that those are volatile and speculative securities.

Once again, the best example of when to buy is to be found in the
2007–2008 financial crisis. Toward the end of 2008, when fear dominated
the markets, spreads to Treasuries of both investment grade corporates
and junk reached record levels. Total return of both investment grade corporate bonds and junk bonds in 2009 was extremely high. (Examples of
these returns will be seen in Chapter 12, on bond funds.)

As this is being written (in May 2010), spreads of corporate bonds
compared to Treasuries have narrowed significantly compared to where
they were in 2008. In the 5 to 10 year maturity range, investment grade
corporate bonds yield around 200 to 300 basis points (2% to 3%) more than
Treasuries.

[Chris · Rating 4 out of 5]

"Bonds for Dummies" is a good alternative title. Incredibly thorough and sheds light for the layperson on the many types of bonds and other financial assets. The examples, tables, and walkthroughs are illustrative and helpful.

Only docked a star for some issues of clarity in the writing. The topic is undoubtedly challenging to write about, but I found myself having to re-read several sections to make sure my understanding was correct.

All in all, great read for an individual investor, someone studying financial advising or even economics.

I originally picked up this book because I thought it was going to be more about how and why bonds are issued at all, and more about macro-economics and sovereign debt. This book is not that, and is meant for investors. But I read through it anyway and learned a lot. I think what's in the book is definitely still helpful for someone who wants to understand bonds, economics, and sovereign and municipal debt.

[Germanicusii · Rating 4 out of 5]

A fine starter for the layman. It requires a good knowledge of basic arithmetic and recommends the use of a good financial calculator e.g. HP 12CP Financial Calculator. This edition c. 2011 is dated but the lessons given are fundamental and remain useful. The current (2017) debate on active vs passive management of bond portfolios is briefly covered. Strategies on emerging from a long, long period of low, low interest rates isn't a topic. The Bond Book is valuable for its seasoned approach to building a long term bond portfolio not including alternative fixed income investments like dividend paying stocks. Well worth the read.

[Joe Silber · Rating 5 out of 5]

Not a perfect book, but very thorough and explains things quite clearly (if a little blandly). It's not an exciting read, but an excellent reference for understanding the world of bonds. It's a tiny bit dated (this version seems to have been updated around 2010 or so) but still covers all the various types of bonds, bond funds, etfs, closed end funds, etc, and has some simple guidelines for laymen investors. Essential reading for understanding credit risk vs interest rate risk (and how you can lose money in a fund invested in treasuries, for example).

[Wayne Coltrane · Rating 5 out of 5]

Good map with directions

I decided to read this book because I'm in cash in my IRA. My advisor recommended ladders. This book gave excellent information on the different types of bonds and how to select a portfolio and strategy. I now have the information and confidence to setup my own ladder.

[Francisco · Rating 5 out of 5]

This books covered everything you need to know about bonds as an individual investor. Did it in a very clear and simple way. I can't recommend this enough to anyone interested in bonds or investment instruments affected by bonds. I am already Looking forward to a revised edition post covid-19.

[Ethan Drower · Rating 5 out of 5]

Best book on the Bond markets i've come across

[Christopher Van Hoosear · Rating 4 out of 5]

It is great book for beginners. It is a little dated, written in 2010, but the majority of the information is still relevant.

[Jhonny Almeida · Rating 5 out of 5]

A Primer on Bonds

This book is great for anyone curious about bonds. You are gently guided through the different types of bonds that exist and what sets them apart and who they are for. Also, you get a description of how the bond market works and some commentary after the '08-'09 crisis.

The book reads more like someone's essay on a topic than a textbook. There is some light math but it does not make the unreadable if it's not your strong point.

[Philip Anderson · Rating 4 out of 5]

The title says it all. Definitely more detail than the average person needs but authoritative anyway.

[Swapnil · Rating 3 out of 5]

The book is good in the sense it drills down the basic concept by repeating it many times throughout the book. It is a good one for beginners.

[Brandon Howard · Rating 4 out of 5]

Very solid book for someone who wants to invest in or know everything about bonds. Everything is explained in a way for the everyday person to understand.

[Domas Janulevicius · Rating 4 out of 5]

3.5

[Piero · Rating 1 out of 5]

I haven't read it, but they say it's very good and the best for introducing bonds.

[K Huffman · Rating 4 out of 5]

If you want to learn about bonds and treasuries but don’t know where to start, this book is that starting point. I follow the markets pretty closely and I know the basics of Bonds, but I wanted to go further in-depth with my Bond knowledge. I started reading a different book about bonds but I was getting lost pretty quick. I decided to read The Bond Book to help me fill in the blanks on a few of the basics that I never really learned. I feel like this book was the perfect starting point before really diving deeper into more complicated aspects and calculations involving bonds.

I don’t directly trade bonds, but the bond market is a major part of our economic cycles, and so as traders we need to understand what is happening in the bond market. This book will give you the basic knowledge that you need to know to understand someone that is talking about the bond market. If you turn on CNBC and you hear a segment about the bond market, it’s nice to at a minimum understand what the conversation is talking about.

Check out my full summary of The Bond Book here: https://kriminiltrading.com/blogs/mus...

[André Pinto · Rating 4 out of 5]

Comprehensive book on bonds. Not overly deep but clear enough. Ideal for the beginner/intermediate level.

For some reason the author seems to have some problem with decimal numbers, using confusing and unnecessary fractional representations.

As almost every other investment book, it was written from the perspective of an American investor.

[Gordon Magee · Rating 4 out of 5]

Served it’s purpose of educating me about bonds

This book is of value if you like me were ignorant about bonds and needed a basic education. I know enough now to have a discussion with my financial advisers, but not enough to go hazard my money without advice.

[Sara · Rating 3 out of 5]

Interesting and informative.

[Do · Rating 3 out of 5]

Even more than you wanted to know!

[Nikola · Rating 5 out of 5]

Clearly written, with calmness of plain woman character. Excellent book about bonds.

[Xavier Shay · Rating 3 out of 5]

Exactly what is says on the tin. Very clear.

[Duc · Rating 4 out of 5]

The best introduction to bond investing in print right now, especially for individual investors.

[James Danaher · Rating 5 out of 5]

The most approachable book for fixed income that didn’t feel like torture.

[Jeff · Rating 5 out of 5]

Excellent look at the bond market and instruments in the bond market. Excellent.