Summary:
Computed daily as a ratio based on the number of trades in a given bond compared to the average number of trades of all the bonds in a similar class. The higher the ratio, the more frequently the bond is traded relative to similar bonds. The range covers the last 45 days. Liquidity is considered a reliable investment factor because it helps indicate if a bond purchased today is likely to have a liquid market available to be sold into at some future date. For example, if an investor's financial situation changes and needs to convert bonds to cash, or if an investor rebalances a portfolio and there is a need to replace an asset with another one that better meets the objectives.
Bonds are rated from one to five stars based on how their liquidity ratios compare to the ratios of bonds in the same equivalency class. The higher the ratio of a bond relative to other bonds in the same class, the more stars it receives.
The liquidity rating, along with BondView’s additional ratings criteria, provide a compass to help investors come to their own conclusions prior to making bond investments.
| Liquidity Rating | Explanation |
|---|---|
| 5 Stars | Highest liquidity group in Equivalency Class 80% to 100%. Excellent opportunity. |
| 4 Stars | Next highest liquidity group in Equivalency Class 60% to 80%. Good opportunity. |
| 3 Stars | Third highest yield group in Equivalency Class 40% to 60%. Neutral opportunity. |
| 2 Star | Fourth highest liquidity group in Equivalency Class 20% to 40%. Poor opportunity. |
| 1 Star | Lowest liquidity group in Equivalency Class 0% to 20%. |
Legend
Black - Bond has a yield in the top tiers of its Equivalency Class. Other factors being equal, you should consider this bond for potential investment.Red - Bond has a yield in the lowest tiers of its Equivalency Class. Other factors being equal, you should consider choosing other bonds with higher yield (ie, higher star rating).