No. of Recommendations: 6

For reading, try Fabozzi's "Handbook of Fixed Income Securities". Not all 1400 pages, just the chapters that seem to apply to what you're attempting. Your local library should have an edition. If you have the math skills, try the first ten chapters of Olivier de la Granville's "Bond Pricing and Portfolio Analysis." (The next eight are truly gruesome.)

As for moving some money into junk bonds at this time, my only suggestion is to be very cautious and to do your homework, meaning, read the SEC filings and know the company's fundamentals well enough to estimate your recovery rate should (when?) they go into Ch 11 so that you keep your expected losses per position under a traderly 2% of assets under management. For reading, try Barnhill's "High Yield Bonds." Expensive at $75 but worth every penny.

The high-yield market has gotten tough and treacherous lately compared to the easy, fat picking of last Fall, but there are still opportunities for taking small, 5-10 bond positions. Lists of current offering [all maturities and credits] can be found at CNNfn, Bondsonline, Tradebonds, Bondagent, etc, some of which require free registration to access the lists.

E*Trade is a reasonable place to buy bonds, especially junk which most online brokers don't offer. [But their margin rates suck big time for still being at 9.75%] If it's investment-grade stuff you want, almost anyone will suffice. (Waterhouse, CSFB, etc.) And when the time comes and the Fed is raising again - yes, it will happen - , don't overlook TreasuryDirect which is a convenient and cheap place to buy at non-competitive auction. (The bonds can subsequently be transfered for free to your broker should you want or need to sell them. Treasury will also sell them for you but they've expensive at $34/bond, if I remember right.)

Lastly, read everything anyone says about bonds - this post included - with a very large grain of salt. The asset class offers opportunities to capture returns that rival equities but it is also an institutionally dominated market and everyone and his brother is a gatekeeper because they all want their cut rather than let anyone have direct access to the action the way the stock market has been opened up to the small investor/trader by the online revolution. (Spreads are atrocious. Data is all but unavailable.Etc.) But it's an interesting asset class structurally and worth a serious look.

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