A professional bond investor always knows that his life is wholly dependent on the behavior of the market. If previously your job was connected with routine work only, you will hardly manage to rearrange yourself quickly for this gambling character of bond tension. However, there are still common rules to multiply your capitals, minimizing risks and saving nerves.
There are many different kinds of bonds, available in the global market. Government bonds, Agency and "Quasi-Government" Bonds, Local Government Bonds, Emerging Market Bonds, Mortgage-Backed and Asset-Backed Securities, Pfandbriefe and Covered Bonds join this investing circle.
Government and corporate bonds remain the largest sectors of the bond market. In the beginning of the developing of the bond industry, government bonds had the support from insurance companies, pension funds and individual investors, seeking a high quality investment for money they need for some specific future purposes. Starting in the 70s', the investors learned that the additional sums might be earned, when trading with bonds in the open market. The very specific way of their today's work assumes a computer help and an involvement of finance professionals, which create innovative ways for borrowers and new ways for investors. The help of professionals will truly help you to cut down risk possibilities and to acquire your return potential.
The safest investments, accessible in the government bond sphere, include sovereign bonds, issued by major industrialized countries like the U.S., Japan and European Union countries (Germany, France, Italy and Spain in their first turn). Government bonds, however, do not eliminate a market risk. In addition, shares of a portfolio of government bonds are not guaranteed. A number of governments also issue sovereign bonds that are linked to inflation, they contain subcomponents, like emerging market bonds, agency and quasi-government bonds and local government bond.
Emerging market bonds are sovereign bonds, issued by countries with developing economies, like Africa, Eastern Europe, Latin America, Russia, the Middle East and Asia, excluding Japan. The market sector has grown and matured significantly in the recent years, attracting many new investors. Emerging market bonds promise very attractive profits, nevertheless, they also are connected with special risks, such as a currency fluctuation and a political risk.
Agency and "Quasi-Government" bonds support the development of small businesses, public projects or developments and affordable housing. Investing in bonds of the local government sphere is needed to finance a variety of projects, from bridges to schools, as well as general operations. They can be also called Municipal bond market. The US and European local government bonds have grown reasonably recently. The interest of this sort of bonds comprises tax-exempt privileges, but not for any purpose. The alternative includes a minimum tax, when investing in bonds.
The other named above non-government bonds tend to have a rate of little or no risk at all. Such low-rated bonds are called "credit spread" and based on the investor's perception of a credit quality and an economic growth. Investing in bonds of this type lowers the risk and promises higher returns.
Join the global community of the bond market if you feel you are able to sustain the constant strain. Do not forget - a successful bond investor owns a well diversified portfolio, which consists of various strategies of active, passive and laddered bond strategies. All of these strategies in one manager and in every certain case will enable maximized returns, investing in bonds.
Therefore, if you are a professional, you know where to invest: whether to follow the active strategy of measured benchmark, replicating the returns of the bond market, or reinvesting passively into maturing bonds without any attempt to maximize returns. If you are a beginner, you should learn to balance in every situation in the market and you will have a guarantee of minimized risks.