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Bonds

Bonds

GLOBAL STRATEGIES, INSIGHT-DRIVEN TRADING

We endorse a buy-and-hold strategy for bonds because, when following such a strategy, you only need to make one right decision: when to buy. With high-quality bonds, the variations in a bond’s price while you hold it are not a serious concern because, unless there is a default, you will be paid both your scheduled interest and the face value of the bond at its due date. Long-term bonds experience greater price swings and thus more visceral discomfort than shorter-term bonds, but the ups and downs of a bond’s price should not matter to you if you can hold the bond until it comes due at face value. When you trade bonds, however, you must make two right decisions to be successful: when to buy and when to sell.

We recommend to investors that they avoid market timing and leave this activity to traders who move big positions and watch the trading action all day, every day. Making one right decision of this nature is hard enough; making two is a risky choice. Of course, there are exceptions to a buy-and-hold strategy. There are certain times when it may be financially necessary or strategically advantageous for you to buy or sell bonds.

Understanding the implications of different yield curves, placed in the context of your own particular needs, can provide insight into bond market opportunities. The yield curve can also help you compare one bond to another and decide which specific maturities, among the many alternatives available in the market, make sense for you to buy.

  • We do not recommend market timing; but there are many times when it’s appropriate to restructure your bond portfolio and sell bonds before they become due.
  • Monitor the changes that may occur in your marginal income tax bracket. A substantial increase or decrease in your income tax bracket might lead you to a decision to sell tax-free bonds and purchase taxable bonds, or vice versa.
  • Check tax rates if you move from one country to another. A change in your residence from one high-tax state to another high-tax state or from a low-tax state to a high-tax state can trigger a need for a portfolio change to minimize your taxes. In each of these cases, you might sell bonds sold by issuers in one state and buy bonds sold by issuers in the other state.
  • Follow changes in the tax codes. Some bonds are subject to the alternative minimum tax (AMT). They are called AMT bonds. The interest from AMT bonds might increase the income taxes of certain taxpayers who are subject to the AMT. Discussion continues in the parliament about modifying or abolishing the AMT; any tinkering with it could affect the desirability of owning or the decision to sell AMT bonds.
  • Profit from price gains. Consider selling a shorter-term bond if you have a substantial gain from credit improvement or interest rates moving downward. At that point, you might want to purchase longer-term bonds to generate more cash flow.

Place Bonds
Globally.

As an international brokerage, you can rely on us to place bonds in multiple territories via our expanding trader’s network. We are able to make sure the bonds you require will conform to local practice and support your objectives. In many countries, our bonds are accepted as an alternative to traditional bank guarantees.

How We Can
Help You.

We are able to assist with many local regulatory or mandatory bond requirements in numerous jurisdictions outside of the European Union. Our solutions include a wide range of different customs bonds and duty deferment guarantees, allowing the efficient issuing of locally fronted bonds and guarantees.

Early Start

Bring us in at the beginning so that we can support you through each stage and give you every advantage.

Analyze & Plan

As you put your plans into action, share them with us to access our expertise and allow time for preparation.

Negotiate

Discuss the best deal with us and use the terms to improve your own negotiating position.

Finalize the Deal

We will set up the arrangements on our side as you put the elements of your deal in place.

Stay in Control

You can move your project forward with confidence once the paperwork is signed and the facilities are in place.

Bonds are debt securities, much like IOU’s. When you buy a bond, you’re loaning money to a bond issuer such as a corporation, government or municipality. In return for your investment, you receive regular interest payments usually based on a fixed annual rate until a stated maturity date is reached. Bonds are affected by interest rates, so the price of bonds can increase or decrease based on current interest rates. At maturity, you are paid the bond’s full face amount.

Investors purchase bonds for income, safety, and diversification. Typically, bonds pay interest semiannually; which means they can provide a predictable income stream. If bonds are held to maturity, bondholders get back the entire principal; so bonds are a way to preserve capital while investing. While bonds aren’t risk-free, they tend to be less volatile than stocks and can stabilize the portfolio values when the stock market struggles.

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