Introduction to US Corporate bonds investment . Part 3

Creating a bond watchlist


http://finra-markets.morningstar.com/BondCenter/WatchList.jsp

Building on the previous article by navigating morningstar bondcenter with the bonds key parameters, we proceed to create a bond watchlist.

The watchlist will display the Symbol,CUSIP which is like the bond id. CUSIP is required when trading with most online brokerage accounts. The watchlist also provide 2 major credit rating agencies S&P and Moody. It is important to monitor the credit rating of your bond as any negative revision could have adverse impact on your bond price.

Here is the breakdown of both Investment Grade and Non-Investment Grade ratings for each rating service.

MOODY’S INVESTMENT GRADE RATINGS:
Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3

S&P INVESTMENT GRADE RATINGS
AAA AA+ AA AA- A+ A A- BBB+ BBB BBB-

MOODY’S NON-INVESTMENT GRADE RATINGS:
Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3

S&P NON-INVESTMENT GRADE RATINGS
BB+ BB BB- B+ B B- CCC+ CCC CCC- CC C D SD

NF = Not Found
NR = Not Rated

The watchlist also display the coupon,maturity data , an almost real time of the bond price , the yield to maturity and the last trading date.

Beside looking at the coupon and YTM of your bond, it is advisable to select a bond portfolio that you can ladder the maturity date so that you can spread out  having too much bonds maturing at the same year.  The maturity date also provide an estimate when your interest will be payout as we know most bonds payout semi-annually. If we see a maturity date of 11/15/2023, we can deduce that the payout month be plus/minus 6 months in Nov and May. If the maturity date is 01/15/2025, the payout month will be Jan and July. Having a ladder payout date also ensure you have interest income in a predictable period.

My current bond portfolio:



 
 
 Buying bond using Interactive Broker

One of the best online brokerage is Interactive Broker(IB) https://www.interactivebrokers.com/en/home.php . IB is best known for low commission.

Once you application for Interactive Broker Account is successfully funded, buying a bond is as easy as buying stock. Launch 'Quick Trade' , click on the bond tab and key in the CUSIP. 
Example below, if I am buying Expedia bond with CUSIP 30212PAJ4 .  
Key in the CUSIP,Quantity and Limit Price. Click on 'Preview Order' and confirm your entry.

How do you decide the limit price?
You can get the hourly trading price for that particular bond from Morningstar bondcenter by clicking the trade history. This trade history will provide information on where the bond price is heading.