Take ownership of your bond investing strategy by choosing from a wide selection of different types of individual bonds.
A broad range of individual bond choices, not just our own
The U.S. government issues Treasuries to pay for operations and fund the national debt.
Issued by corporations, these bonds generally offer higher yields (with greater risk) than government bonds.
These are debt securities that are issued by states, cities, counties, and public enterprises to finance government projects and other expenditures. Municipal bonds are usually exempt from federal and state taxes if you purchase them from issuers in your home state.
Agency bonds are issued by government-sponsored or government-owned enterprises such as the Government National Mortgage Association (GNMA) or Federal National Mortgage Association (FNMA).
Secured by real estate loans, these investments make payments to investors from the interest and principal paid on the underlying mortgages.
Schwab BondSource® gives you access to over 60,000 bonds from more than 200 dealers, including new-issue municipal and corporate bonds,1 at the best price available to Schwab.
Schwab Fixed Income Specialists are 100% dedicated to fixed income investments and work one-on-one with you to help you narrow your bond search and get you the best price Schwab offers.
Our fixed income offerings now include Wasmer Schroeder™ Strategies.
What are the costs?
- New bond issues
New bond issuesTreasuries>(new issues and secondary trades)$0†$0 online>
New bond issuesSecondary trades>
$0†$1 per bond online>$10 min./$250 max. online*
- Corporate bonds
- Municipal bonds
- Government agencies
- Zero-coupon Treasuries (including STRIPS)
New bond issuesBroker-assisted trades>$0†Online pricing plus $25/trade>
Large-block transactions (orders of more than 250 bonds) may be eligible for special handling and pricing. Please call us at 800-626-4600 for information (Monday–Friday, 8:30 a.m.–6:00 p.m. ET).
*Schwab reserves the right to act as principal on any fixed income transaction, public offering or securities transaction. When Schwab acts as principal, the bond price includes our transaction fee (outlined above) and may also include a markup that reflects the bid-ask spread and is not subject to a minimum or maximum. When trading as principal, Schwab may also be holding the security in its own account prior to selling it to you and, therefore, may make (or lose) money depending on whether the price of the security has risen or fallen while Schwab has held it. When Schwab acts as agent, a commission will be charged on the transaction.
†For new-issue securities, a selling concession is included in the offering price.
The fundamentals of bond pricing.
Find the best price.
The same bond can be offered at different prices. Schwab simplifies the search by automatically presenting you with the lowest price available to us from over 200 dealers.1
Maximize your return potential.
Because the yield you earn on a bond is impacted by what you pay for it, shopping around for the lowest price and transaction fees can help you potentially increase your return on a bond without adding risk.
Compare price against yield.
Hypothetical bond: 4% interest, 10-year maturity
DealerYield to Maturity>A4.00%>B3.94%>C3.85%>
Source: Schwab Center for Financial Research and Bloomberg. Assumes semi-annual coupon payments. For illustrative purposes only.
Bonds are often quoted with a number of cost components bundled together, making it difficult to know what you're actually paying for each component. So it's important to understand any commissions or transaction fee built into the price (and indirectly the yield), as well as any additional fees.
Be sure to ask these questions:
- How much am I paying in commission or transaction fee on this bond?
- Do you have a standard transaction fee schedule for bonds, or does the transaction fee vary?
- How much am I being charged in management fees?
3 things about Bond investingOpens in popupRead transcriptfor 3 things about Bond investing
- We're going to go over three things that all investors should know about bonds.
Colin, what might investors see as a surprise when bond investing?
- Well, there isn't just one bond market, and there isn't just one interest rate.
The bond market is very large and complex, and there's a lot of different types of bonds out there.
Certain types of bonds, like U.S. Treasuries or certificates of deposit or investment-grade municipal
bonds, have very low risk.
But other types of bonds, like high-yield corporate bonds or emerging market bonds, do come with additional risks and are more prone to bouts of price volatility.
So if you're considering bonds, it's not as simple as just owning bonds in general.
It's important to identify the types of bonds that fit your risk tolerance and investing time horizon.
But there also isn't just one interest rate.
Different types of bonds can offer different yields, and even within a given type of bond investment,
the yields may vary based on the time to maturity.
And there are a lot of factors that can affect the yield that a bond offers.
- You told us about the difference between coupon and yield.
Can you tell us a little bit more about that relationship?
- The coupon rate is the interest rate that a bond pays based on its par value.
Generally speaking, most coupon rates are fixed.
The yield, or yield to maturity, is the total annualized yield an investor can expect to earn
if a bond is held to maturity, but it also takes into account the price paid.
Bond prices can move in the secondary market, and prices can be above or below its par value.
So the yield to maturity takes into account not just the coupon payments received, but whether the price will rise or fall to its par value by its maturity date.
So if you're considering investing in bonds, you don't want to look just at the coupon rate,
but what the yield to maturity is to have a better idea of what your potential total return will be
if held to maturity.
- Bond prices fluctuate.
Can you tell us a little bit more about the bond's relationship between its price and its yield?
- Bond prices and yields generally move in opposite directions.
Let's assume a bond has a 3% coupon rate--it's priced at par, so it offers a yield to maturity of 3%.
Now let's assume in a few months, the prevailing interest rate has risen to 4%.
Now this existing bond is only paying a coupon rate of 3%, so its price would likely fall
to compensate investors and offer a yield that's slightly higher than what its coupon rate is.
Now, this is important because when you own bonds, you want to have a better idea of how they might perform
given the interest rate environment.
So if yields are rising, bonds prices could fall--but the opposite is also true.
If bond yields are falling, they could actually experience price appreciation.
Now this won't necessarily matter if bonds are held to maturity.
- These are just a few of the most frequently asked questions.
You can find more information about bond investing on Schwab.com.
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Watch the video about 3 things you should know about bond investing.
Find and manage fixed income investments.
Streamline your search for fixed income investments and simplify managing your trade decisions and portfolio with our easy-to-use fixed income resources.
New to bonds?
Investors often overlook bonds because they're more familiar with stocks. To understand bonds, start by understanding how they differ from stocks.
- What exactly is a bond?
- Primary differences between stocks and bonds
- How bonds are paid out.
- Consider bond laddering to balance between income and risk.
- Who issues bonds?
- How do bond rates and yields work?
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