Price Disclosure

Bond prices are hard to find. When I started in the business you had to build your own models to estimate where a corporate bond should price. The bid offer spread for corporate bonds was quite wide. A government bond trades at a one basis point spread between buying and selling. Corporate bonds trade as wide as 20 basis points between buying and selling. Corporate bonds don't trade in continuous markets like stocks do. The bond may only trade once a month so you didn't know the market price. A year ago Nasdaq started reporting all the trades made on more than 20,000 of the largest corporate bonds in what is called the TRACE system. This has allowed buyers to see where the market is. As a result, the bid offer price on corporate bonds has come in by more than 8 basis points, about half on average. This price discovery has saved buyers more than $1 billion in commissions. It is one of the big reasons brokers are laying off their analysts. Several big firms have done so. As a result, now you can buy bonds and have a much better idea of where they should price. Stock exchanges are thinking of listing 4,000 bonds. If they do this we will have continuous markets and the bid offer spread should collapse even further.