IB and bonds - 1% margin?

[nzbryant]

All

I read IB has only 1% margin requirement for Treasuries with less than 1 year to maturity. Does that mean you are only paying interest on 1% of face value (so 1% x face value x margin interest rate, ie. a tiny number) but receiving the interest on the bond? If so, why wouldnt everyone do this? Seems like a 'free lunch'....?

 

[zdreg]

you are receiving interest on 100% of face value. you are paying interest on 99% of face of value
a guaranteed losing trade if there ever was one.

 

[nzbryant]

Quote from zdreg:

you are receiving interest on 100% of face value. you are paying interest on 99% of face of value
a guaranteed losing trade if there ever was one.

Oh thanks. I didnt do the math properly. They lend you 99% - got it.