Treasury Bond

Yields on Treasury bonds fluctuate just like any other debt security. T Bonds are long term (10-30 years) and pay interest semi-annually.

Because US Treasury Bonds are AAA rated with higher credit quality than corporate bonds or other debt securities, their yields tend to be lower than others. However, they are very liquid and trade very close to the interest rate or yield markets.

http://www.aitraining.com/treasurybond.htm

Yield To Call - Callable Bonds

Many bonds, including corporate and municipal securities are callable and will have a yield to call.

An issuer that puts a call feature on a bond is inserting that date as a way to refinance out early, if they choose to do so. The advantage to the issuer is that if interest rates decline, the municipality or corporation can redeem the higher interest rate bond and replace it with a lower bond rate. If this take place, the investor will realize a yield to call - instead of a yield to maturity.

Whether the YTC is better or worse for the investor will depend on when the redemption takes place and what price the bond is called at. The price is important, as it can be below, the same, or higher than the price the invetor paid. That will determine call yield.

If the bond is called at a higher price than what was paid, the YTC will be higher and vice versa.

The main risk with a bond that is called is it forces the investor to reinvest the money at a lower rate, as bond yields should be lower in the market at that time.

There could be other reasons for calling a bond early such as: rearranging maturities or just having the money to not have to offer the debt anymore. There is no reason to issue bonds if you don't need the money.

http://www.brokerjobs.com/bondyield.htm

Tax Free Yield

One of the yields investors are seeking more and more are tax free yields offered by municipal bonds.

Muni bonds are federally exempt on the interest received. They are subject to state and local tax. The heavier the tax bracket - the better the yield will be.

If a bond was issued at par and had a coupon rate of 4% and the investor is in the 30% tax bracket, the tax free rate of return would be figured out by dividing 4 by 100 - the tax bracket of 30. This would come out to 5.71%

Municipal bonds offer a chance to earn interest without taxation. If you buy a bond issued in your home state, you could be triple tax free.

Rating, coupon rate, geographical area and bracket are the main factors of whether someone should buy a muni bond.

http://www.brokerjobs.com/munibonds.htm