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Real Data on Bond Markets

Real Data on Bond Markets
Welcome, I'm wearing my glasses because I'm going to take you to a website. So what I've done already is I'm at If you stare the box above, it says You can go to any site. I go here because it's very easy to go to, and the data is readily available, and you'll see that it's showing some data, the stock market data and all right up front. Today, we are talking about bonds, and I don't wanna get caught up in these stories, actually, I was just reading them, and it's fascinating. What I'm going to do is, if you're on the left panel, if you notice, you'll see Market Data, and when you go to Market Data, you'll see Bonds.
It'll take me to a page which you should be able to see. Do it with me. So if you have your laptop open, say, You go up, and when you'll see something called the Bond Center. Now this is, sorry for my joke, but it's as in James. [LAUGH] I had to say that. It's so silly, but I had to. If you notice, the first column is maturity, so 3 month, 6 month, 2 year, 3 year, 5 year, 10 year, 30 year. What do you see? You see the pattern that I had mentioned to you before, and we did numbers with, which is pretty cool. So the yield to maturity is 0.19, 0.39, 0.92, 1.21, 1.61, 2.25, 2.99.
I'm sure you can find this fascinating data for your own country wherever you are and just play with it. It may or may not go up to 30 years, but pretty it's fascinating. So what we spoke about is right there, I hope you can go from the yields to the prices. Remember though, that the yields are quoted annually, so remember the rate we divided by 2, and everything including zero coupon bonds are valued on a six month basis compounded. We sometimes assume the year for simplicity. So that's one thing, the second thing I would like to show you is I'm going to press the link here, Composite Bond Rates.
The composite bond rates are interesting because although we focused a lot on US Treasuries, and that's the first panel you'll see, you'll also see municipal bonds. And this site is for America and the municipal bonds, you'll see yields also increasing with maturity, but there's a little bit of a curve ball there. Because municipal bonds tend to have more risk, these are state bonds, than federal government, which assume to have the basic risk free structure, you'll see the rating show up. So AA, AAA and typically, what you'll find is that the lower the rating of the bond, the higher the yield of maturity. Now that doesn't have to be every single time.
Remember this is at one point in time, at one instant in time, and what we expect to happen is on average, right. So many times people will say, the stock price fell, and the bond price went up. Isn't that the opposite of what you would expect? No. On average, riskier things are expected to pay more. Not always, not every time, okay. If you go down and I'm going to go to the lowest panel, what you also see are corporate bonds, and again, you see a whole yield curve going from 2 year AA to 20 year A. So clearly, AAA is the highest quality. AA is the next and so on, so forth.
Again, I think you notice two patterns, again, not perfectly. The two patterns are the following, as time goes up, yield to maturity goes up. This is not always the case, but tends to be the case because we are risk adverse. Long-term bonds, prices fluctuate a lot more given everything else. Therefore, we are not willing to pay as much for them as the otherwise similar short-term bonds. But there is also AAA, AA going on and the way they are listed is, that the rates of return on a high quality bond should tend to be lower than the rates of return on a lower quality bond. So just mess around, look around.
The reason I wanted to spend about a few minutes on this is to show you why I love finance is that it is not just talk. Many things in life, we talk about things, but to find a real world match of what we are talking about, to have almost a perfect match is just fascinating to me. And that's one of the reasons why I am so excited about teaching the fundamentals or advanced stuff. All of that can be done with images of real world applications.
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