The spreads on Treasuries make them difficult to sell or mark up more than a few ticks to most sophisticated banks and institutions. A tick is 1 point in price. Government bonds are quoted in 32nds.

An example of a treasury bond would be: Bid 101-16 Ask: 101-24. If your client wanted to buy $10,000 of this treasury bond, you would see the price to you at 101-24 (24/32). 24/32 = .75. So the price is really 101.75 or $10,175. Each point represents $10 for every $1000 par bond. For $10,000, each point is worth $100. All bonds trade at a minimum of 1000. Institutions normally buy $250,000 up to tens of millions per trade. So, our example of a $10,000 trade really isnt realistic and would not be worth your time. A tick by the way, is if the price went up to 101-25.

Trading for a few ticks on $100,000 would make you very little. If you factor in ticket charges, you might make $100 on the trade. You only present treasuries if its non competitive, or if the client is investing at least $1,000,000, otherwise it wont make you much. If your client deals with 3 other brokers on treasuries, you will all be fighting for very little money. Its very easy to get a quick quote on treasuries. Every major dealer owns them, and they can be purchased quickly. You or your trader will contact a major brokerage firm (Merrill Lynch, UBS etc.) and buy them. Not much money yes, still, it is assets you are controlling, and it could be used as available money to swap out of into a better investment for the client.

Treasuries are very safe of course, thats why they are bought. Only buying treasuries will diminish the rate of return of the entire portfolio, if that is their only or main investment vehicle. Treasuries offer flexibility though. The market values on them will normally hold up well over time. They are very liquid and can be traded instantly. You should sell them only as time bucket or maturity gap placing.

If you see the bank has nothing maturing in the first half of a year for instance, you can recommend treasuries there too. Remember, institutions are looking for best price, but also good advice. The medium sized banks ($50 million - $500 million assets) will value good planning and thoughtful recommendations over dealing with 10 brokers all day. The larger institutions are more complicated, and require more price awareness. They think they have the ideas covered and you may have to just be an order taker with them.

How To Sell Mortgage Backed Securities or CMO's

Mortgage backed securities offer the best alternative to decreased loan demand. Pass throughs, CMOs and adjustable rate MBSs are paid to the bank just like a loan that the banks has made for a mortgage. If a person takes out a $250,000 mortgage, the customer is paying back the bank monthly with principle and interest. As you know, if you own a home, your initial payments are mostly INTEREST in the early years. A mortgage backed security, if it is a new issue will operate the same way.

Length of the outstanding mortgages, or current face of the mortgages are a factor. Seasoned pools, as they are called, are mortgage pools that have had several years of payment on them. They have more predictable payments and duration. They will normally pay better because of that. Seasoned pools are usually what banks are looking for. They are generally interested in better cash flow and predictable cash flow.

The compensation or mark up potential is good in mortgage backed bonds. They are priced above treasuries because, although they are AAA rated, they are not absolute in their pay off and the payments fluctuate. Since they are usually 15-30 years in duration, they allow for price mark up. Where treasuries and straight agency debt allow for a few ticks to a .25, MBSs can create spreads between buying and selling them up to a or of point. This can translate to a $5,000 commission on a $1 million sale. Remember, a million dollars in one bond is not unusual for most institutions, and for banks over $500 million in assets, its normal.

Other Types Of Institutions To Sell Bonds to:

There are other institutions that buy bonds of course. However, other institutions for the most part can buy other competitive investments, and deal with other brokers in those areas. Also, many of these others hand over portions of their major assets to professional money managers. Banks, CUs and municipalities only buy fixed income, so their entire portfolio is available to you. They also will very rarely turn their entire portfolio over to a 3rd party. That is not the case with some of these others. They would include:

Insurance Companies Foundations Universities Hospitals Pension Funds Cemeteries (Yes, even them)

Ultimately, these accounts can buy almost any type of bond. Corporate bonds can be offered as well. Still, your opportunities are spotty in with these accounts. Information or lists of these types of accounts can be obtained through directories or other sources.

Focus on the Financial and public institutions. They will be a much higher percentage play for you to sell bonds.

Good Luck!

Nick Hunter is the President of American Investment Training and he writes for brokerjobs.com - a finance education and career job site for brokers.