| BUSINESSWEEK ONLINE : MAY 24, 1999 ISSUE | ||||||||
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| COVER STORY
How to Seal a Great Bond Deal For the first time, investors have the pick of the litter You can purchase nearly any stock online. Bonds are another story. The U.S. bond market is huge--$13 trillion. But unlike stocks and bond mutual funds, most individual bonds trade over the counter, meaning publicly available price data is scarce. So investors are at the mercy of brokers, who often charge fat trading spreads and commissions. Still, if you know where to shop, you can seal some great bond deals on the Net. Be careful: Many brokers that claim to sell bonds online don't. You have to deal with them by phone and pay high markups. E*Trade and Discover Brokerage Direct are different. They give investors access to large inventories of bonds and offer real-time prices and on-the-spot ordering. ''For the first time, individual investors can comparison shop and get a fair shake,'' says Marilyn Cohen, president of Envision Capital Management, a Los Angeles fixed-income money manager. E*Trade's Bond Center, launched last December, is the better of the two brokers. (For a free demonstration of E*Trade's Bond Center, visit www.bond-exchange.com, and click on the E*Trade logo.) Its inventory comes from the trading desks at several bond dealers, and customers can see lists of corporate, agency, U.S. Treasury, municipal, and zero-coupon bonds, plus certificates of deposit. You can search for a specific bond by maturity and industry, and you can use E*Trade's calculator to create a ''laddered'' bond portfolio with successive maturity dates. Quoted prices include a markup of a half-percent to three-quarters of a percent, compared with 1% to 3% for a discount or full-service broker. There's a $40 fee if you buy less than $20,000 worth of Treasuries or $10,000 worth of corporates, however. We used E*Trade's site to search for an AT&T bond with a 6% coupon maturing Mar. 15, 2009. E*Trade's offering price: 97.49, or $974.90 per $1,000 face value. Money manager Cohen phoned other retail brokers and found them selling the bond for around 98.50. On $25,000 worth of these bonds, E*Trade would thus save you $251.50. Selling a bond is as easy as buying. Your order goes to a host of brokers who will respond with bids, if they're interested. Discover's offerings are more limited. It lists Treasuries and about 50 munis from Morgan Stanley Dean Witter's inventory. It does feature some unique calculators. One determines a bond's yield to call, which is the yield you'll receive if the issuer redeems a security early. Discover's pricing on munis is competitive with that of E*Trade. A third broker, Bond-Agent, fell short. Like E*Trade, it lists thousands of offerings from different trading desks. But most of its bonds are subject to availability, which means they could be gone when you order. Many prices aren't real-time. When you place an order, if bond data shown is different from what's available, BondAgent will call you. If you're looking for info, visit Bonds Online. It's not a dealer but a database that lets you see prices and inventories. It also has a bond market forum. The Bond Market Assn.'s site, meanwhile, helps you price muni bonds by letting you see the previous day's prices of 1,000 issues. If you're interested in U.S. government debt, Treasury Direct allows current account holders to purchase securities via the Bureau of the Public Debt Web site. The government deducts the price from your bank account. Whether you want to buy bonds or just educate yourself about the market, the Net is breaking down the clubby fixed-income world. Buying bonds online is still not as easy as purchasing stocks. But you can save a bundle if you're savvy. BY TODDI GUTNER _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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 Your Guide to Online Investing COVER IMAGE: Our Guide to Online Investing CHART: The Biggest Online Brokers TABLE: Broker Scoreboards TABLE: Online Brokers That Meet Your Needs Gotta Do the Legwork ``A Diversity of Thought'' Testing the Waters Commentary: Why Old-Line Firms Need New Online Tricks TABLE: Full-Service Dream The Right Tools for the Right Trades Street.Cop TABLE: Smart Investing on the Web TABLE: Web Resources for Online Investors Rocket Science Made Simple TABLE: Quant for a Day How to Seal a Great Bond Deal TABLE: Where to Buy...And Get Info What to Read: The Good, the Bad, and the Terrible TABLE: Wired-Up Investing Books Investor Beware of Web Talk TABLE: Separating Fact from Fiction TABLE: Cross Checkers Smells Fishy? Tell the SEC This EDGAR Is a Real Know-It-All TABLE: Searching the SEC Commentary: Analyst Calls: Let Investors Listen TABLE: Calling All Netizens The Barker Portfolio: A Battle Plan for Accidental Investors Inside Wall Street: Wells Fargo Online CHART: The Rise Trails Other Banks Inside Wall Street: Bidding for 3COM? CHART: Prior Takeovers Fizzled Out Inside Wall Street: A TV-To-Net Linkup CHART: ACTV's Rise Is Due to E-Commerce INTERACT E-Mail to Business Week Online | |||
