Buying Bonds — On Margin

If a bond yields 6% and your brokerage charges 4% for margin, you theoretically pocket a 2% "positive carry" on the borrowed funds.

Margin rates at retail brokerages are often higher than high-quality bond yields, creating a "negative carry" where the cost of borrowing exceeds the income generated. Strategic Review: Pros vs. Cons Buying on Margin: How It's Done, Risks and Rewards buying bonds on margin

Buying bonds on margin involves borrowing money from a brokerage to increase your total bond position, using your existing portfolio as collateral. While often seen as a strategy to boost income, it is a that carries significant risks often underestimated by fixed-income investors. Core Mechanism: The "Carry Trade" If a bond yields 6% and your brokerage