| BUSINESSWEEK ONLINE : NOVEMBER 15, 1999 ISSUE | ||||||||
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| FINANCE
'The Prices Are Lower, and the Yields Are Higher' Steve Kane, a 47-year-old accountant, sometimes used to call 12 brokers a day for help in managing his portfolio of 200-plus municipal bonds. Now he logs on to the Internet, puts in the criteria for the type of bond he wants, and buys online. ''I love the easy access 24 hours a day, 7 days a week,'' says Kane. Even better, ''the prices are lower, and the yields are higher.'' There are dozens of reputable brokers who provide good service--and many others who claim to offer bonds online but don't. Such brokers may merely show inventories of bonds without having the capability to do transactions online--forcing you to use the phone and pay hefty markups. Even at the best sites, only some of the bonds have real-time prices and click-of-the-mouse-it's-yours capability. And most bonds are subject to availability. Still, that's an improvement. And it's getting better for investors as more sites pop up. E*Trade Group Inc. was the first online broker to have a wide selection of corporate, agency, U.S. Treasury, municipal, and zero-coupon bonds from several dealers. Now it has competition from entrants such as Tradebonds.com, DLJ Direct, and MuniDirect. Like E*Trade, Tradebonds.com, a division of Finacorp Securities, has pooled inventory of all types of bonds from numerous dealers. But it's targeting sophisticated investors who wants to invest more than $100,000 and need more analysis and investing tools than E*Trade offers. The minimum to open an account is $25,000. Commissions range from 30 cents per bond up to $10 for the more esoteric issues. WHOLESALE. For purchases of up to 100 bonds, Tradebonds.com's pricing is competitive with E*Trade's. But for bulk buys, Tradebonds.com's prices are far lower. For example, on Tradebonds' site, an IBM bond with a yield of 7.35% maturing on Feb. 12, 2008, had an offering price of $93.50, or $935.00 per $1,000 face value. On E*Trade's site, the same bonds were selling for $93.75. Thus, for 150 bonds, Tradebonds.com would have saved you $702. DLJ Direct's sales pitch is that it gives wholesale prices to retail customers. That may be what the advertising says, but you should definitely do your homework. In recent pricing comparisons with E*Trade on one municipal and two corporate bonds, E*Trade came out slightly better. On some issues with longer maturities, however, DLJ came out ahead. The good news: DLJ Direct is the first Wall Street firm to roll out a comprehensive bond-buying Web site with reported commissions. For a wider selection of municipal bonds--some 6,500 were posted recently--take a look at MuniDirect. This user-friendly site guides you effortlessly through the search criteria of the maturity, credit quality, and price of the muni bonds you're interested in. It guarantees a $5 markup per bond on any round lot, and the disclosure of their commission in writing. That's a tremendous savings over a typical broker fee that can be as high as $30 per bond. It's best to use several accounts, so you can shop around. For information on investing in bonds, check out www.bondsonline.com. The service is not a dealer but a database that lets you see prices and inventories. Or visit the Bond Market Assn.'s Web site, www.investinginbonds.com. It's an excellent research tool and lists the previous day's prices for 1,000 municipals and corporates. Buying online doesn't eliminate the arcane intricacies of the bond market. But if you can master the research--tools, you should have a shot at getting a bargain price. By Toddi Gutner in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Special Report: The E-Bond Revolution TABLE: The New E-Bond Market GRAPHIC: Taking Bids from around the World CHART: A Surge in E-Bond Trading ``The Prices Are Lower, and the Yields Are Higher'' TABLE: Where to Buy Bonds Online INTERACT E-Mail to Business Week Online | |||
