Bond Baba: The Zero Coupon Bond Play For A Smart Tax Adjusted Return



Bond Baba has another interesting bond in play. This time it’s a [bond], that has about four years left to go.

The deal is this:

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Liquidity is a big risk. There are just not enough bonds out there! So you might not be able to purchase any bonds.

Lastly, the downside is of tax rules changing. If this happens and the bonds get taxed as “income” then the post tax yield will be lower.

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Bond Baba doesn’t recommend blind buying of anything. Bond Baba only helps you think better, and find opportunities. Be well, and do not take more risk than you can afford.

Selling on the Exchange A Few Days Earlier

You can find buyers at a close price a few days before maturity. The bond stops trading 15 days before maturity, so you have to sell a little before that. In this case, the bond stops trading on 9/10/2020. So around the 5th of October, you want to find a buyer. The price you want to sell at is 2165.

A buyer should like this – buying at 2165 and redeeming at 2177.7 is a return of nearly 11.27% annualized, for just 19 days. Hey, if no one else is willing to buy at that rate, you can ask a few friends if they’d be willing! It’s better than keeping your spare cash in a deposit, for sure.



Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.


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