Radical Guide to Online Bond Investing: Tip: Check Corporate Bond Trade Report

Like municipal bonds trade reports, you only need to go to one website for the free and publicly available trade information on corporate bonds: www.investinginbonds.com.  From there, you’ll see the tab Corporate Market At-A-Glance.  Click on this tab to begin the trade report search for corporate bonds.

For corporate bonds, NASD sponsors the trade reporting through the Trade Reporting and Compliance Engine (or TRACE).  NASD announced in February 2005 that the “entire universe” of corporate bonds are covered, approximately 29,000 separate issues or 99% of all corporate bond trades. 

Currently the window for reporting is within 30 minutes, which should narrow to 15 minutes this summer.  The NASD also noted that, at the end of 2004, over 82% of the bonds were reported within 5 minutes.

For anyone used to the corporate bond market, the really large benefit of TRACE reporting is in the coverage of below-investment-grade bonds.  So illiquid and fractured is that market, it is a marked improvement to have the trade reports for these bonds in one place.  (GM and Ford will no doubt be the lion’s share of all below-investment-grade trade reports). 

Once you’ve arrived at the reports screen, you can begin to search the reports. 

Unfortunately, compared to the MSRB municipal bond trade reporting (discussed in Tip:  Check Municipal Bond Trade Reports), the TRACE reporting comes up short.  Here are some tips:

  • You will not be told what transaction transpired! This is very odd.  You are shown a net price and yield with no statement --- anywhere --- about whether the bond was sold or bought.  With easily 2-3 point bid/ask spreads, especially on below-investment-grade bonds, the difference in an executed sale and purchase price will be very large.
  • You can use CUSIP for specific bond searches, but you are limited to “issuer” for all other searches.  This is not helpful when, for example, you enter “GM” and the number of returned trade reports appears to be open-ended.
  •   Unlike the MSRB data, the broad category searches on maturity, credit, price or yield, for that matter, are not there.
  • Also, you are not told on the report that the reported yield is “yield-to-worst” --- in fact, it is unclear what yield it is.  In the MSRB data, both the yield-to-call and yield-to-worst are presented (sometimes one and the same).  In the TRACE trade reports, all call price and yield information are buried in the calculator screens. 
  • You can see that the canned searches are ONLY by “activity” --- i.e., most active bonds in the last trading day and the most active bonds during the last 5 days. Why would NASD emphasize activity, which is implied in this canned search?  As our public watchdog of the markets, their statement is that what matters most is activity. It’s an odd search criteria coming from Washington.

The TRACE corporate trade data are more tricky, and perhaps less compelling, than the MSRB municipal bond trade data.  This difference is even more compelling in light of the relative sizes of the markets.  The municipal bond market dwarfs the corporate one by a factor of 30 (by the number of issues).   

We now turn to a way to a way to buy US government bonds without paying commissions. Sound good? Keep reading!

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June 3, 2005 | Permalink

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