Introduction to fixed income trading

Introduction to fixed income trading

Fixed income trading allows for capital preservation and income goals. Use the Fixed Income interface on the Schwab Advisor Center® Web Trading platform, to access thousands of fixed income securities and perform several types of trades. To complete certain transactions, contact an advisor bond specialist at the Advisor Services Fixed Income Desk Tooltip .

  • Access listings from over 200 dealers*, offering over 175,000 distinct daily CUSIPs, including over 115,000 municipal bonds.
  • Moody's bond ratings and credit reports.
  • Select new issue and secondary market offerings.
  • Narrow or broad-based searches of market inventory.
  • Detailed information about specific bonds, including coupon rate, yield to maturity, yield to call, yield to worst, coupon frequency, and more.
  • Access to competitive rates and yields, from 3 months to 30 years, for available online fixed income products.
  • Bid and sell available fixed income products online in the Bid Request tab. 
  • When buying and selling a fixed income product, you are responsible for supplying all account and allocation information to the trader at the time of trade.
  • When placing trades via telephone, Schwab fixed income specialists read each order back for verification. It is the responsibility of you and/or your client to ensure the accuracy of trade orders.

*Average daily quotes in Schwab BondSource® for 2023.

To trade foreign fixed income call your Advisor Services Fixed Income Desk for trade-specific information. Advisor assisted trade fees might apply.

Directed tradesDirected trades take place in the bond market when an investment advisor requests that Schwab execute a trade, with a specific dealer, price, and account at Schwab. Advisor and the other executing dealer take full responsibility for the fairness and reasonableness of the price to the customer.

To place a directed trade, provide the applicable trade information to the Advisor Services Fixed Income Desk. Schwab will confirm the transaction with the contra broker-dealer and send a trade confirmation to the client. Refer to the Charles Schwab Pricing Guide for applicable fee information for directed trades.
Cross tradesCrossing orders between client accounts involves securities transactions in which the same broker executes both sides of the trade. They are executed within the limits of the prevailing market price (usually the bid and ask prices). Beneficial ownership must change, and in general, neither buyer nor seller can be related to the investment advisor.
Evaluated pricingSchwab uses certain firms for pricing data. Learn how Schwab prices bonds, see Evaluated Pricing.
Flexible trading solutionsSchwab offers additional services allowing you to place trades for fixed income products with other broker-dealers Tooltip for accounts custodied at Schwab.
Minimum denomination rules

This varies from one specific issue to the next. Because of the risk associated with holding positions below the minimum, Schwab cannot support allocations to the client account in denominations below the specific security's minimum unless stated in the guidelines below.

The risks encountered when holding positions below the minimum are:

  • Liquidity risk
  • Unfavorable pricing
  • Potential ineligibility for reorg items.

See Minimum denomination rules for general guidelines.

Type of investmentCutoff time
General bonds5:00 p.m. ET
U.S. Treasury auction 
  • Treasury Bills and Floating Rate Notes
10:00 a.m. ET (day of auction)
  • All other Treasury Notes and Bonds
11:00 a.m. ET (day of auction)
UITs3:00 p.m. ET

This chart displays standard settlement dates for fixed income trades. Specify modifications to the standard dates in the bid or offer.

Type of investmentNumber of days after trade date to settle
Agency bond1, unless specified by trader
Corporate bond1
Municipal bond1
U.S. Treasury bond1
Zero-coupon Treasuries (STRIPS)1

Independent rating agencies evaluate fixed income securities Tooltip , such as Moody's Investors Service or Standard & Poor's (S&P).

Corporate bond ratings

Moody's ratingS&P ratingRating description for category
AaaAAA
  • Considered the highest quality
  • Extremely strong capacity to pay interest and repay principal
AaAA
  • Considered high quality by all standards
  • Very strong capacity to pay interest and repay principal
  • Differs from higher-rated issues only by a small degree
AA
  • Considered upper-medium grade
  • Strong capacity to pay interest and repay principal
  • Somewhat susceptible to economic conditions and changes
BaaBBB
  • Lowest category of investment-grade bonds
  • Considered medium grade
  • Capacity to pay interest and repay principal considered adequate but somewhat more susceptible to economic conditions and changes
BaBB
  • Highest category of high-yield or "junk" bonds
  • Considered to be speculative and subject to substantial credit risk
  • Future of bond not well assured
  • Major exposure to changes in business or economic conditions which could lead to an inadequate capacity to meet timely interest and principal payments
BB
  • Speculative and subject to high credit risk
  • Has current capacity to meet interest payments and principal repayments, but adverse changes in business, financial, or economic conditions will likely lead to the inability to meet those commitments
  • Weaker assurance of interest and principal payments
CaaCCC
  • Considered to be speculative of poor standing and subject to very high credit risk
  • Default vulnerability great and currently identifiable
  • Favorable business and economic conditions needed to meet payment of interest and repayment of principal
CaCC
  • Highly speculative
  • Likely in, or very near, default
  • Highly vulnerable to nonpayment
CC
  • Lowest rated class of bonds
  • Typically in default
  • Extremely poor prospects of recovery of principal or interest or ever attaining any real investment standing
DD
  • In default or bankruptcy

 

Commercial paper ratings

RatingRating description
P-1Highest quality
P-2Higher quality
P-3High quality
Below P-3Not considered prime paper

 

Municipal short-term debt security ratings

RatingRating description
MIG-1Highest quality
MIG-2Higher quality
MIG-3Favorable quality
MIG-4Adequate quality

Does Schwab facilitate the trading of foreign bonds?
Yes. However, trading hours, settlement dates, and fees can vary, so contact the Denver Advisor Services Fixed Income Desk at 800-491-1851 or the Phoenix Advisor Services Fixed Income Desk at 800-468-4965 for trade-specific information.

Does Schwab have its own fixed income inventory?
Yes. Schwab inventories bonds and CDs, in addition to offering broad secondary market access through the Fixed Income interface on the Web Trading platform that connects to major Alternative Trading Systems.

Does Schwab transact fixed income trades on a principal or agency basis?
Schwab acts in a principal capacity for the majority of trades. This means a markup or concession will be included in the price of the security to reflect the cost of the trade. Trades that take place on an agency basis are subject to a commission which is not included in the price of the security.

How can I cancel or correct fixed income trades after execution?
Complete and submit the Cancel Rebill Request form. If an account holder's signature is required, also submit the Addendum to Cancel Rebill Request form.

The best way to submit the request form(s) is to go to the Accounts tab and click New Service Request. In the Service Request, select Send Message in the Request Topic field. Under the Request Subtopic field, choose Fixed Income Team. Then attach the relevant forms to the message and click Send.

Schwab will make every effort to correct the trades as intended in a timely fashion, acknowledging that the submission of this form is not an agreement by Schwab that a trade adjustment will be made.

How to trade equities, mutual funds, and options through the Web Trading platform
How to trade fixed income securities
Introduction to equity trading
Introduction to investment research
Introduction to mutual fund trading

See the Charles Schwab Pricing Guide for fee information.

Access the Research page on Schwab Advisor Center for specific information pertaining to the available fixed income securities.

To learn more about general fixed income trading, contact Schwab Fixed Income Trading or send a Schwab Advisor Center service request.

Access to electronic services may be limited or unavailable during periods of peak demand, market volatility, systems upgrades, maintenance, or other reasons.

Orders placed through the online channel are considered self-directed, and Schwab does not assess the suitability or the potential value of any particular investment. The information presented herein does not consider your particular investment objectives, tax status, or financial situation and does not make personalized recommendations. This information should not be construed as an offer to sell or a solicitation of an offer to buy any security. The investment strategies and the securities shown may not be suitable for your client. By placing an order, you acknowledge that you have made your own determination as to whether any of these securities are consistent with your client's investment objectives and risk tolerance. To place an order for a security listed herein, follow the links provided or contact a Charles Schwab Fixed Income Trading Representative at 888-986-3700.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Investment value will fluctuate, and bonds, when sold, may be worth more or less than original cost. Fixed income securities are subject to various other risks, including changes in interest rates and credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.

Credit ratings are only a current assessment by a rating agency of the perceived creditworthiness of the issuer and/or guarantor and not a guarantee of future creditworthiness or performance.

Most issuers of debt securities (including corporate and municipal bonds, debentures, notes, and commercial paper) and preferred stock rated by credit rating agencies have, prior to assignment of any rating, agreed to pay fees to such credit rating agencies for appraisal and rating services. The range of fees paid is disclosed on the credit rating agencies' respective websites. In addition, there may be affiliations between (a) directors of credit rating agencies and entities who hold ratings from such agencies and (b) entities that hold a rating from a credit rating agency that have reported ownership interest in such agency to the U.S. Securities and Exchange Commission. More detailed information about such affiliations is also disclosed on the websites of the respective credit rating agencies.

By accessing and using information provided by any credit rating agency, you expressly agree that (a) the credit ratings and other opinions contained in such information are, and will be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities; (b) each rating or other opinion will be weighed solely as one factor in any investment decision made by you or on your behalf or any user's; and (c) you will accordingly make your own study and valuation of each security, and of each issuer and guarantor of, and each provider of credit support for each security that you may consider purchasing, holding, or selling.

In the bond market, there is no centralized exchange or quotation service for most fixed income securities. Prices in the secondary market generally reflect activity by market participants or dealers linked to various trading systems. Bonds available through Schwab may be available through other dealers at superior or inferior prices compared with those available at Schwab. The securities listed herein are subject to availability. All prices are subject to change without prior notice.

Schwab reserves the right to act as principal on any fixed income transaction.  When Schwab acts as principal in a secondary market transaction, the bond price includes our transaction fee (as outlined in the Charles Schwab Pricing Guide), 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.

Tax-exempt bonds are not necessarily a suitable investment for all persons. Information related to an issue's tax-exempt status (federal and in-state) is obtained from third parties, and Schwab does not guarantee its accuracy. Tax-exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.

Certificates of deposit available through Schwab CD OneSource® typically offer a fixed rate of return, although some offer variable rates. They are FDIC-insured and offered through Charles Schwab & Co., Inc.

The information is obtained from sources believed to be reliable; however, its accuracy or completeness is not guaranteed. Charles Schwab & Co., Inc. and its affiliates, employees, and/or directors may hold positions in the bonds shown in the system or in companies named in research reports available from Schwab, and Schwab and its affiliates may, as principal or agent, transact with customers.

Third-party firms, including third-party platform sponsors, are not owned by, affiliated with, or supervised by Charles Schwab & Co., Inc.

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