| If you want to make good money with
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| | dealing with 10 brokers all day. The
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| banks, or any institution, Government and
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| | larger institutions are more complicated,
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| agency bonds are where it is at. Simply
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| | and require more price awareness. They
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| because all Government bonds and agencies
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| | think they have the ideas covered and you
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| are AAA rated, and banks can buy millions
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| | may have to just be an order taker with
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| of dollars of any bond without incurring
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| | them. How To Sell Mortgage Backed
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| any credit risk.All banks own bonds of
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| | Securities or CMO's Mortgage backed
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| some sort, and they are buying them from
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| | securities offer the best alternative to
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| brokers. Our primary bonds are:
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| | decreased loan demand. Pass throughs,
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| U.S. Treasury obligations (T-bills,
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| | CMO's and adjustable rate MBS's are paid
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| T-notes, T-bonds)
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| | to the bank just like a loan that the
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| Government Agency Debt (GNMA)
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| | banks has made for a mortgage. If a
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| Private Agency Debt (FNMA, FHLMC, FHLB
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| | person takes out a $250,000 mortgage, the
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| and others)
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| | customer is paying back the bank monthly
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| Mortgage Backed Securities (Pass
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| | with principle and interest. As you know,
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| throughs , CMO's, ARM's)
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| | if you own a home, your initial payments
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| Municipal Bonds
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| | are mostly INTEREST in the early years. A
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| Investment Grade Corporate Bonds
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| | mortgage backed security, if it is a new
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|
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| | issue will operate the same way.Length of
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| The institutions that have strict policy
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| | the outstanding mortgages, or current
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| guidelines on the bonds that they can buy
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| | face of the mortgages are a factor.
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| are Banks, Credit Unions and
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| | "Seasoned pools", as they are called, are
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| Municipalities.The spreads on Treasuries
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| | mortgage pools that have had several
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| make them difficult to sell or "mark up"
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| | years of payment on them. They have more
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| more than a few "ticks" to most
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| | predictable payments and duration. They
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| sophisticated banks and institutions. A
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| | will normally pay better because of that.
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| tick is 1 point in price. Government
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| | Seasoned pools are usually what banks are
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| bonds are quoted in 32nds.An example of a
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| | looking for. They are generally
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| treasury bond would be: Bid 101-16 Ask:
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| | interested in better cash flow and
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| 101-24. If your client wanted to buy
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| | predictable cash flow.The compensation or
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| $10,000 of this treasury bond, you would
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| | mark up potential is good in mortgage
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| see the price to you at 101-24 (24/32).
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| | backed bonds. They are priced above
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| 24/32 = .75. So the price is really
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| | treasuries because, although they are AAA
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| 101.75 or $10,175. Each point represents
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| | rated, they are not absolute in their pay
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| $10 for every $1000 par bond. For
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| | off and the payments fluctuate. Since
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| $10,000, each point is worth $100. All
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| | they are usually 15-30 years in duration,
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| bonds trade at a minimum of 1000.
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| | they allow for price mark up. Where
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| Institutions normally buy $250,000 up to
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| | treasuries and straight agency debt allow
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| tens of millions per trade. So, our
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| | for a few ticks to a .25, MBS's can
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| example of a $10,000 trade really isn't
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| | create spreads between buying and selling
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| realistic and would not be worth your
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| | them up to a ½ or ¾ of point. This can
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| time. A "tick" by the way, is if the
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| | translate to a $5,000 commission on a $1
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| price went up to 101-25.Trading for a few
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| | million sale. Remember, a million dollars
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| "ticks" on $100,000 would make you very
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| | in one bond is not unusual for most
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| little. If you factor in ticket charges,
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| | institutions, and for banks over $500
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| you might make $100 on the trade. You
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| | million in assets, it's normal.Other
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| only present treasuries if it's non
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| | Types Of Institutions To Sell Bonds
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| competitive, or if the client is
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| | to:There are other institutions that buy
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| investing at least $1,000,000, otherwise
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| | bonds of course. However, other
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| it won't make you much. If your client
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| | institutions for the most part can buy
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| deals with 3 other brokers on treasuries,
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| | other competitive investments, and deal
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| you will all be fighting for very little
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| | with other brokers in those areas. Also,
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| money. It's very easy to get a quick
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| | many of these others hand over portions
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| quote on treasuries. Every major dealer
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| | of their major assets to professional
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| owns them, and they can be purchased
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| | money managers. Banks, CU's and
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| quickly. You or your trader will contact
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| | municipalities only buy fixed income, so
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| a major brokerage firm (Merrill Lynch,
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| | their entire portfolio is available to
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| UBS etc.) and buy them. Not much money
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| | you. They also will very rarely turn
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| yes, still, it is assets you are
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| | their entire portfolio over to a 3rd
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| controlling, and it could be used as
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| | party. That is not the case with some of
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| available money to swap out of into a
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| | these others. They would
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| better investment for the
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| | include:Insurance Companies
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| client.Treasuries are very safe of
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| | Foundations
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| course, that's why they are bought. Only
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| | Universities
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| buying treasuries will diminish the rate
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| | Hospitals
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| of return of the entire portfolio, if
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| | Pension Funds
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| that is their only or main investment
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| | Cemeteries (Yes, even them)Ultimately,
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| vehicle. Treasuries offer flexibility
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| | these accounts can buy almost any type of
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| though. The market values on them will
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| | bond. Corporate bonds can be offered as
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| normally hold up well over time. They are
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| | well. Still, your opportunities are
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| very liquid and can be traded instantly.
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| | spotty in with these accounts.
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| You should sell them only as "time
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| | Information or lists of these types of
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| bucket" or maturity gap placing.If you
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| | accounts can be obtained through
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| see the bank has nothing maturing in the
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| | directories or other sources.Focus on the
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| first half of a year for instance, you
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| | Financial and public institutions. They
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| can recommend treasuries there too.
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| | will be a much higher percentage play for
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| Remember, institutions are looking for
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| | you to sell bonds.Good Luck!Nick Hunter
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| best price, but also good advice. The
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| | is the President of American Investment
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| medium sized banks ($50 million - $500
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| | Training and he writes for - a finance
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| million assets) will value good planning
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| | education and career job site for
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| and thoughtful recommendations over
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| | brokers.
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