Can someone explain to me the different between how Term bonds and Serial bonds are quoted? Also, are Series bonds quoted the same way as Serial bonds? Lastly, since corporate bonds are quotes in percentage of par format, that makes the majority of them term bonds, right?
Hi @Geoffrey_Beer - good questions!
The primary place this is discussed in our materials is in this chapter. Here are the generalities to know for the exam:
- Term issuances (corporate, municipal dollar bonds) - quoted on a percentage of par basis
- For example: 99, 102 1/8, 95 3/4
- Serial issuances (municipal general obligation bonds) - quoted on a yield basis
- For example: 5% bond trading on a 7% basis (yield to maturity)
In my experience, series bonds are quoted like serial bonds - on a yield basis. However, I believe it depends on the issue. We don’t expect our customers to encounter questions on how series bonds are quoted, so I wouldn’t worry about it.
Lastly, since corporate bonds are quotes in percentage of par format, that makes the majority of them term bonds, right?
Yes - you should assume virtually all corporate bonds are issued in term format.
Thank you very much! Also, I’m guessing STRIPS, TIPS, and all other zero-coupon bonds are quoted in yield format (similar to T-bills)?
You’re almost there! T-bills, STRIPS, and other zero coupon debt securities are quoted on a discount yield basis. Keep in mind TIPS are not zero coupon securities and are quoted like other non-zero coupon Treasuries on a price basis in 32nds.