Martin Leibowitz, long known as Wall Street's bond guru, has just revised his classic book on bonds and the bond market: "Inside the Yield Book" (Bloomberg Press, Princeton, N.J., 2004).
Written with the late Sidney Homer, "Inside the Yield Book" was first published in 1972 and was at that time the first serious look at the workings of bonds and the bond market.
Mr. Leibowitz, who is now a managing director at Morgan Stanley Inc., New York, says that when it was first published, the book caused "a big splash in a very shallow pond." That's because bond investing was a backwater. Most bonds were bought and held, not traded.
Perhaps in part because of the insights provided by the book, all of that changed in the mid-'70s. Bond portfolios started to be more actively traded as investors sought extra return, and measures of bond risk, such as duration, became more widely accepted.
One of the key insights of the book — and this is something of which most bond investors, amateur and professional, were ignorant in 1972 — was the impact of reinvestment, and the reinvestment rate, on bond returns.
For the new edition, Mr. Leibowitz has added new topics not addressed in the first edition, including a discussion of future value, Macaulay's duration and immunization.
"Inside the Yield Book" is now even more a book that every serious investor should read and keep handy on his or her bookshelf .
