Trading Bonds

Once you know what a bond is, the next question is practical: where do bonds come from, and how do regular investors buy them? Bonds trade in two related arenas—the primary market and the secondary market—and many people also get bond exposure through funds instead of picking individual bonds.

Primary market: new bonds

In the primary market, bonds are created and sold for the first time. The issuer (or its underwriters) sells the new issue to investors and receives the proceeds.

U.S. Treasuries: the government auctions bills, notes, and bonds. Individuals can buy many Treasury products directly through TreasuryDirect, or through a brokerage.
Corporate and municipal bonds: new issues are typically brought to market by investment banks / dealers. Access for individuals varies; many retail investors participate later in the secondary market, or through funds.

New bonds are often priced near par, but the exact issue price depends on demand and prevailing yields at launch.

Secondary market: trading after issuance

After a bond is issued, investors can buy and sell it among themselves in the secondary market. This is where prices move away from face value as interest rates and credit conditions change.

Most individual investors access the secondary market through a brokerage account. Bond quotes are commonly shown as a percentage of par. For a $1,000 face-value bond:

100 means about $1,000 (par)
98 means about $980 (discount)
102 means about $1,020 (premium)

Corporate and municipal secondary markets are often less centralized than stock exchanges. Liquidity (how easily you can buy or sell near a fair price) varies a lot by bond. Treasuries are generally among the most liquid; a small corporate issue may be harder to trade without a wider bid/ask spread.

Accrued interest: if you buy a coupon bond between payment dates, you typically pay the seller the interest that has accrued since the last coupon. Your first coupon then “reimburses” you for that amount. Broker trade confirmations usually show this separately.

Common ways investors get bond exposure

Individual bonds: you pick a specific Treasury, CD, municipal, or corporate bond, collect coupons, and (if held to maturity and paid as promised) receive principal back. Useful when you care about a specific cash flow date.
Bond mutual funds and ETFs: a fund holds many bonds. You get diversification and easy trading (especially with ETFs), but the fund does not “mature” like a single bond—its share price keeps fluctuating with rates and holdings.
CDs (certificates of deposit): bank deposits with a stated rate and term. They are related fixed-income products, often FDIC-insured up to limits, but they are not the same as a Treasury or corporate bond.

What to check before you buy

Issuer and credit quality — Treasuries, agencies, municipalities, and corporations have very different risk profiles; ratings (when available) are a starting point, not a guarantee
Coupon, maturity, and yield — compare yield to maturity (and yield to worst if callable), not just the coupon rate
Call features — can the issuer redeem early? That can cut short a high coupon when rates fall
Costs and liquidity — markups/spreads, fund expense ratios, and how hard the bond is to sell later
Taxes — interest may be taxable; some municipal bond interest can be federal- and/or state-tax favored depending on the bond and your situation

If you are still building intuition, go back to Bond Basics for coupons, price, and the rate/price relationship. Then look at real quotes on your brokerage platform or Treasury auction results so the numbers stop feeling abstract.

For the bigger picture—Fed policy, inflation, stocks vs. bonds, and “bond vigilantes”—see Things You Should Know.

This is educational background—not a recommendation to buy any specific bond or fund. Match product risk, time horizon, and tax treatment to your own situation, and consider professional advice when you need it.