Buying and selling bonds

J-C Bailly

I am not exactly new to Quicken... but there is one thing that I have yet to be able to understand regarding the buying and selling of bonds:
Bonds values are expressed as a percentage 102%, 96% etc... If I use the above in "Buy Bonds", I just cannot make my records match with the reality because entering the purchase of 25'000 Bonds XYZ at 102.45% in Quicken gives me: 25'612'500.
I have to type 0.10245 to get the real value of 25'612.50
However, on the ledger it shows that I bought 250'000 shares (instead of 25'000) at 0.10245 (instead of 102.45%).
To circumvent this, I have been using "buy shares" and fill up the security details as "Bonds", so as to be able to keep my books at their correct level of actual Bonds and Values.
When updating the value of my Bonds, I would use for example 1.0245 (to take the same example as above) for 102.45%.
Could someone kindly explain to me what my comprehension does not grasp, please, what is Quicken rationale for this kind of operation?
Many thanks.

q_lurker

I'll offer my understanding of both how Quicken operates and how the real world operates.  YMMV and nothing I say should be taken as an absolute truth.

Quicken Premise 1:  Bonds are bought (and sold) in nominal $1,000 units.  That is, one might buy 10 $1000 bonds.

Quicken Premise 2: Bonds are priced on a basis of $100 par value.  That is, prices vary around $100 plus or minus as interest rates and bond ratings vary over time.  As the bond approaches maturity, it gravitates to a quotes value of $100. 

Quicken handles both of these premises as follows:
For the Bonds Bought transaction, the program expects the user to tell the program that they bought xx number of $1000 bonds.  Perhaps that is paying $26,000 for 25 $1000 bonds (the investor paying a premium of $1000 over the face value of the bonds).  The program then processes that as buying xx0 'shares' of the bonds priced based on the $100 par value.  For my example, Quicken would translate the Bonds Bought transaction to owning 250 'shares' of the bond for which the user paid $104 per 'share'. 

I tend to bypass the Bonds Bought transaction and instead just use a regular Bought transaction.  Comes across as simpler to me.  But I would still be buying the bonds considering the $100 par value as the baseline since all my brokerage info subsequent will be pricing those on that scale  Same goes for my approach on selling the bonds.  

HTH

q_lurker

I'll offer my understanding of both how Quicken operates and how the real world operates.  YMMV and nothing I say should be taken as an absolute truth.

Quicken Premise 1:  Bonds are bought (and sold) in nominal $1,000 units.  That is, one might buy 10 $1000 bonds.

Quicken Premise 2: Bonds are priced on a basis of $100 par value.  That is, prices vary around $100 plus or minus as interest rates and bond ratings vary over time.  As the bond approaches maturity, it gravitates to a quotes value of $100. 

Quicken handles both of these premises as follows:
For the Bonds Bought transaction, the program expects the user to tell the program that they bought xx number of $1000 bonds.  Perhaps that is paying $26,000 for 25 $1000 bonds (the investor paying a premium of $1000 over the face value of the bonds).  The program then processes that as buying xx0 'shares' of the bonds priced based on the $100 par value.  For my example, Quicken would translate the Bonds Bought transaction to owning 250 'shares' of the bond for which the user paid $104 per 'share'. 

I tend to bypass the Bonds Bought transaction and instead just use a regular Bought transaction.  Comes across as simpler to me.  But I would still be buying the bonds considering the $100 par value as the baseline since all my brokerage info subsequent will be pricing those on that scale  Same goes for my approach on selling the bonds.  

HTH

J-C Bailly

Thank you, I believe the explanation you give demonstrate that bonds are sold according to different rules in different countries. I have only Canadian and European bonds and those generally come in groups of 5'000 at 100% upon release and then the percentage will vary according to risks and market trends, but any way I tried, I could never actually use the Quicken "BuyBond" tool since the calculation is totally off and, like you, I compromised by using the "Buy Shares" tool that is also forcing you to enter an expense when buying the interests, and a revenue when selling the same.