Can anyone recommend a good broker to keep a large portfolio of govt bonds at??? IB is my trading account broker but I am a BIT LEERY OF PARKING a large $ amount of bonds at a broker who has never sent me a piece of paper in the mail for the past 5 years of having an account....any advice is appreciated....thanks in advance
Best Broker To Keep Large Portfolio Of Govt Bonds ???
- Thread starter larrybf
- Start date
def
Sponsor
Larry, I'm not sure what else we can do to provide some comfort but a piece of paper shouldn't provide comfort (look at all the recent scandals and they all provided detailed paper statements). With IB you get an electronic updated statement each day plus can see your portfolio marked live at any time via the acct window on the TWS.
Now while the credit agencies haven't been doing a bang up job of late, it may offer some comfort that while they are scrambling to cut ratings on many firms, IBG LLC's rating from S&P was just bumped up a notch from BBB to BBB+.
I agree with Def that paper statements shouldn't be an important consideration for your decision.
However, I think there are several question you should consider which he didn't mention. These are:
1) What kind of government bonds are these?
2) How big is your "large" portfolio?
3) Do you plan to actively trade them or borrow against them?
The reasons these are relevant are:
1) Type of bonds:
If they are inflation indexed bonds (TIPs) or other treasury cusips that IB doesn't trade, you may have a problem.
IB doesn't offer trading in all government bonds. For example, I wish IB would allow its customers to trade the treasury inflation indexed bonds which trade and settle just like all other government bonds. However, they have chosen not to do so. According to IB customer service (admittedly not the most reliable source) you cannot transfer a government bond to your account if IB doesn't trade it.
Perhaps Def has some insight on why IB has decided not to offer trading on some treasuries?
2. Portfolio size:
If your government holdings will push your IB account over the SIPC $500 thousand limit, then I think it would be a big mistake to make the transfer unless you intend to trade or margin the bonds with IB rather than just custody them. A passive treasury portfolio is very simple to custody at a variety of brokers since there are so few coupon payment dates, no corporate events, etc. Why not take advantage of the free $500k per account SIPC insurance by simply spreading them over the requisite number of brokers. I believe you can even custody them directly with Treasury by transferring them to your Treasury Direct account.
3. Trading/borrowing:
If you are considering trading or borrowing against the portfolio, then obviously you want them at a broker which has good capabilities in that respect. I know IB has excellent margin rates. (That's why I wanted to move some inflation indexed bonds there.) I can't comment on their current treasury bond trading features since they don't trade the bonds in which I am interested. However, I do know their initial attempt at trading corporate bonds was very poor.
However, I think there are several question you should consider which he didn't mention. These are:
1) What kind of government bonds are these?
2) How big is your "large" portfolio?
3) Do you plan to actively trade them or borrow against them?
The reasons these are relevant are:
1) Type of bonds:
If they are inflation indexed bonds (TIPs) or other treasury cusips that IB doesn't trade, you may have a problem.
IB doesn't offer trading in all government bonds. For example, I wish IB would allow its customers to trade the treasury inflation indexed bonds which trade and settle just like all other government bonds. However, they have chosen not to do so. According to IB customer service (admittedly not the most reliable source) you cannot transfer a government bond to your account if IB doesn't trade it.
Perhaps Def has some insight on why IB has decided not to offer trading on some treasuries?
2. Portfolio size:
If your government holdings will push your IB account over the SIPC $500 thousand limit, then I think it would be a big mistake to make the transfer unless you intend to trade or margin the bonds with IB rather than just custody them. A passive treasury portfolio is very simple to custody at a variety of brokers since there are so few coupon payment dates, no corporate events, etc. Why not take advantage of the free $500k per account SIPC insurance by simply spreading them over the requisite number of brokers. I believe you can even custody them directly with Treasury by transferring them to your Treasury Direct account.
3. Trading/borrowing:
If you are considering trading or borrowing against the portfolio, then obviously you want them at a broker which has good capabilities in that respect. I know IB has excellent margin rates. (That's why I wanted to move some inflation indexed bonds there.) I can't comment on their current treasury bond trading features since they don't trade the bonds in which I am interested. However, I do know their initial attempt at trading corporate bonds was very poor.
def
Sponsor
Someone else can pipe in here as I'm not fully up to speed on the bond offerings. I know you can trade treasuries. http://individuals.interactivebroke...ook/getstarted/trade_bonds_and_treasuries.htm
In regards to TIPS, I did receive this info:
The firm we trade bonds with does not offer them at this point. However, they do plan to add them this year. Keep in mind though that there is poor liquidity in TIPS because so many buyside firms have trouble valuing them.
def why doesn't ib at least give the option of monthly paper statements or the very least send out a yearly 1099? i assure you this has cost ib much business and will constrain there growth going forward. people with millions want to see an occasional statement in the mail. its very dangerous if somebody dies and nobody knows they had an ib account.how the hell would anyone know if they never told anyone? ib has become somewhat main stream and its time to change a few policies.
larry, if you have a substantial bond position that will not be used as collateral for margin purposes (to take advantage of low margin rates), why not diversify for safety purposes. Initiate an ACAT transfer to Schwab or Fidelity. Before you do, verify they have no inactivity fees. Neither firm will go belly up.