How to Become an Expert in the Bond Market

by Walter Johnson

Becoming an expert in the money or bond markets rests on two pillars: education and experience. One does not exist without the other. The money markets are a rapidly moving, technologically controlled eternally changing world where billions can be lost in an instant. Money markets are one of the most important financial intermediary institutions in the world and are truly global in scope.

1. Get an economics degree. This is not a business or a marketing degree. Economics is the foundational science of the typical business degree. An economics degree will -- without exception -- provide you with the statistical, econometrical and mathematical tools to work through important problems in the money markets. Without a firm education in statistical methods and regression analysis -- sometimes known as econometrics -- your usefulness to the markets will be highly limited. Remember: an economist can lecture to a business MBA, not the other way around.

2. Subscribe to and follow every possible news and information source dealing with macroeconomic policy. This is indispensable. The money market is moved by information. Information can only be properly interpreted by experts in the field. Often, these markets use a highly technical language that assumes you have a solid background in the field as a whole.

3. Follow the news of the nation, especially as concerning its fiscal or monetary policy. In truth, there is no distinction between political and economic news. One always affects the other. For better or worse, political systems run on money. To a great extent, large corporations buying bonds affect the credit rating of the country. These are constantly intertwined.

4. Keep the basic variables straight in your head at all times. You will be dealing with the basic macroeconomic variables such as money supply, prime rate and consumer debt. You are also dealing with more political variables such as budgeting, tax systems and policy, foreign policy and trade deficits. All of these interact in a very complex circle of cause and effect.

5. Specialize in a specific field. The fact is that the bond market, as such, is often too large and moves too quickly for one person to follow completely. It might be a good idea -- depending on what sort of job you want -- to follow a specific type of bond. This can be long term, private sector debt or government issued Treasury bills. This type of specialization will permit you to have detailed information in your specific subfield at your fingertips. In the markets, this specialized information is in high demand. If you have language skills, then focusing on the foreign bond market will put you in very high demand. If you want to follow the money markets in China and Hong Kong, then a solid grounding in the language is a must.

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