Bond market analysis is an important investment strategy tool for those investors who are interested in this particular market. This analysis is used to secure the bond’s future and provide a history of the issuer, an important factor in determining the investment plan.
Bond indexes and various bond market quotes are consulted for the purpose of bond market analysis. Bond markets are generally used by the companies and the government to generate funds for varying needs. The investment is considered a loan to the bond issuer. These loans are given by the general or institutional investor in order to secure fixed income through the dividend.
After a given maturity period, the invested amount is returned to the investor with the predetermined interest rate. Now, the bond market analysis becomes essential in such situations as it can provide the complete history and expected future of the particular bond.
Bond market analysis, if done properly, reduces a huge amount of risk on the investor’s part. When new issues of existing stocks are introduced in the primary market, the previous performance of a particular stock can be analyzed. This may help the investor in making an investment decision.
Additionally, when IPO’s are introduced in the market, the bond market analysis is essential before any type of investment is made as it may aid in foreseeing the stock’s future.
The bond market analysis can be divided into two types, known as technical bond market analysis, and basic bond market analysis. Basic bond market analysis is concerned with the calculation of the intrinsic value by measuring the bonds financial, economic, qualitative and quantitative equations.
The basic analysis is also determined by the bank interest rate, as changes in the bond market are related to one another. Technical analysis is done through the charts and indexes to find out the historical facts about the stock.
Last Updated on : 10th July 2013