Corporate fixed income over 5.6 percent | Page 3 | General financial discussion | Discussion forum

Briguy said

I've never tried buying a bond before, so I might have been doing this wrong.I pretended to buy 5000 dollars worth of CWB on ITrade, and I put a qty of 5000, and it showed a fee of 25.00, which is assume is about 52 bonds, since it's showing a 95.72 cost.
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Scotia iTRADE quietly waives the commission only on orders for $25,000 of bonds or less and for bonds maturing in 89 days or earlier.

Those Canadian Western Bank 2.606% bonds mature 2025/01/30, which is way more than 89 days in the future.

Try it for some Royal Bank of Canada 2.333% bonds that mature 2023/12/05. Yield to maturity is around 5%. Around 2.3% of the 5% return is interest. The rest is capital gains.

It is not a good idea to buy bonds if one can't hold them to maturity. One could easily get hosed when selling the bonds because the order will only be routed to the broker's bond desk and not to a marketplace, like an exchange, where multiple buyers can compete for the bonds.

I've bought bonds from Scotia iTRADE that had an ask quote but no bid quote. That means the bond desk didn't want the bonds back in their inventory at all!

Yes, low-coupon short-term bonds have been much more tax efficient than a GIC, like Hubert's one-year cashable term deposits. That's why most of my Hubert one-year term deposits have been cashed and the funds placed in such bonds. It is more work as bonds don't auto-renew. Near maturity, one needs to start looking at what bonds one's broker has in inventory for reinvestment.

Briguy said
That's actually a much more tax efficient method of earning than a 1 yr cashable GIC from Hubert, and fairly similar, except harder to cash in if you need the money in your example before Dec 5. Its a pretty safe bet that interest rates will stabilize for a while, and possibly go down 50 points over 2024, so most likely if you are forced to sell your bond before maturation you may even make money if the interest rates do go down.  

Keep in mind bond dealers at brokerage are there to get rid of their inventories, not to facilitate two way trade, which in the retail case, is to provide retail seller a market to sell their holdings. You will be in for a shock for what bid you will see if u do have the need to sell before maturity for whatever reason.
Biggest lie in bond trading when a bond salesperson tells u ‘my loss is your gain’ when they tell u a bond is a good buy.

Buying less than 90 day bonds you'll likely get hit with a relatively large accrued interest payment that you will have to pay when buying before getting the full 6 month payment on maturity.
At this time of year that may mean the accrued payment occurs in 2023 and the interest payment is in 2024 (unless you stay within 2023 maturity i.e. ~40 days) .
This may or may not be a good thing in your individual tax situation.