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Bonds are quoted in hundreds,
but negotiated in denominations of thousands. A bond price quote of $86 ?
means that the bond is negotiated not at $86.75, but rather at $867.50 per
bond. The bid price is the highest price that a buyer would pay for a bond.
For example, when someone
sells a bond whose market price is 94 ? , the highest point that a buyer
would offer would be $945.00 per bond. The ask price is the lowest price
offered for a bond buy the seller. For example, an investor that buys a bond
with a bid of 94 ? and an ask price of $94 5/8 would pay for the bond
$946.25 (the lowest price that a seller of this bond will accept). The
spread is the difference between the bid and the ask price of the bond, part
of which is a commission to pay to the broker or dealer. A large spread
indicates a bond inactively traded. Bonds are bought in similar way as
stocks.
Although a large part of the bonds is bought and sold through brokerage
firms, one can purchase some bonds through banks or directly from issuers.
The different type of purchase orders (market and limit orders) used to buy
stocks are also applicable to purchase bonds. Note that finding current bid
and ask prices of a bond can be difficult because the bond market is a
dealer market in which the same bonds can be offered at different prices.
For example, a dealer offers a General Motors bond with a maturity date of
2028 at a price of $867.50 and other dealer asks for $900 for the same bond.
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