Bond swap

(redirected from Bond Swaps)

Bond swap

The sale of one bond issue and purchase of another bond issue simultaneously. See: Swap; swap order.

Bond Swap

A situation in which one sells a bond while buying another bond at the exact same time. One may conduct a bond swap for any number of reasons, such as to receive a better coupon, to increase or decrease risk, or to attain a tax advantage from the sold bond and maintain a diversified portfolio with the bought bond. See also: Swap.

bond swap

The selling of one bond issue and concurrently buying another issue in order to take advantage of differences in interest rates, maturity, risk, marketability, and other factors. In some instances, especially with municipals, bond swaps are undertaken in order to realize losses for tax purposes. See also intermarket spread swap, rate anticipation swap, reverse swap, substitution bond swap, tax swap.
How can I obtain a tax benefit from a bond swap?

Bond swaps are done for many reasons (such as to improve income, improve quality, change maturity schedule, or enhance diversification). Thus, if the bond swap is worthwhile, it will be done for various economic reasons rather than simply for tax benefits. (Of course, there is nothing wrong with obtaining a tax benefit at the same time.) A tax benefit is often realized when an investor sells bonds that were acquired during a period when interest rates were lower than they were at the time of the swap. Because interest rates rose, bond prices fell, and the seller is able to generate a tax-deductible capital loss. The tax savings may be viewed as an ancillary benefit derived from the bond swap. A word of caution is in order, though: if you are considering a bond swap that will generate a tax-deductible capital loss, do not swap into a security classified by the Internal Revenue Service as basically identical to the one you sold until the appropriate time period has passed. Otherwise, the loss will be disallowed for tax purposes.

Stephanie G. Bigwood, CFP, ChFC, CSA, Assistant Vice President, Lombard Securities, Incorporated, Baltimore, MD

Bond swap.

In a bond swap, you buy one bond and sell another at the same time.

For example, you might sell one bond at a loss at year's end to get a tax write-off while buying another to keep the same portion of your portfolio allocated to bonds.

You may also sell a bond with a lower rating to buy one with a higher rating, or sell a bond that's close to maturity so you can buy a bond that won't mature for several years.

References in periodicals archive ?
Other funds that have also rejected bond swaps that followed Argentina's record default in 2002 lurk on the sidelines and could launch similar lawsuits.
Banks have pledged to shoulder part of the burden through bond swaps, but much of the details still need to be agreed.
Holder developed several analytical and trading applications for Cantor Fitzgerald's FX options, emerging markets, government bond swaps, euro bond swaps and interest rate swaps desks.
In the newspapers, talk of bond swaps, bailouts and the dreaded D-words--default and devaluation--periodically rock the faith of Argentina's 36 million consumers.
For both the interest rate and covered bond swaps, BNS serves as swap counterparty.
Under the terms of the existing contract governing the bond swaps of 2005 and 2010, which 92.
Another plank in the rescue of Greece is a scheme for private creditors to contribute through bond swaps and a debt buy-back.
These swapping recommendations are often disguised as "year-end portfolio rebalancing," "municipal bond swaps," "avoiding capital gains" and a whole litany of rationalizations meant to provide cover for the ultimate objective -- cramming home some year-end commission dollars.
8 million, facilitating favorable yield-enhancing bond swaps in a higher interest rate environment.
price yield calculations - effective duration and option-adjusted spread analysis - historical data (including security prices, yields, spreads, and prepayment and factor history) - cash flow analysis - scenario rate of return ("what if" analysis) - one-for-one or two-for-one bond swaps - forward pricing and actual returns - matrix P/Y
said, "We now offer the complete spectrum of Treasury products on a single platform and early activity indicates that Treasury Swaps will achieve the same high level of interest we have seen in European Government Bond Swaps.
An integrated bond calculator allows investors to analyze single bonds or bond swaps via an interactive query screen, producing measures for yield, risk, and shock analysis.