Aegis Capital’s Fixed Income Group has assembled a team of dedicated sales and trading professionals with more than 160 years of collective experience who interface with a network of institutional and private clients. The combination of sales and trading breadth allows us to serve our clients and deliver a preeminent platform for client execution. Clients are offered liquidity, execution, underwriting expertise, ideas and service.
As markets become volatile, many investors turn to bonds as an alternative to stocks. While bonds can play an integral role in a well-diversified portfolio, investors should fully understand their characteristics before investing. Bonds are often deemed a "safe" investment. However, investors need to be aware that bonds, like all investments, do carry some risk, and those risks need to be considered carefully.
For bond investors looking for low risk investments, U.S. Treasuries are typically the best bet, as they are backed by the full faith and credit of the U.S. government. The U.S. Treasury regularly offers three types of securities: Treasury bills, notes, and bonds. Treasury bills (or T-bills) are short-term securities that mature in one year or less from their issue date and are purchased for a price less than their face value. Treasury notes and bonds are securities that pay a fixed rate of interest every six months until the security matures. Treasury notes mature in more than a year, but not more than ten years from their issue date. Bonds, on the other hand, mature in more than ten years from their issue date. Interest from Treasury securities is taxable at the federal level; however they are exempt from state and local income taxes, which make them particularly beneficial if you live in a state with a high tax rate.
Just as the federal government needs funds to operate, local governments and public entities, such as school districts, often issue municipal bonds to meet their financial needs. Municipal bonds can be issued by states, cities, towns, or public commissions to provide money for schools, hospitals, and other public works. These securities provide income that is free of federal and, in some cases, state and local taxes. (Although income generated by most municipal bonds is exempt from taxes, any capital gains earned from the sale of bonds are subject to all federal and most state tax laws and certain bonds may be subject to the alternative minimum tax.)
Corporate bonds, unlike U.S. Treasuries and municipal bonds, are fully taxable and may carry greater risk. At the same time, they may offer higher returns than tax-advantaged bonds. Corporate bonds are issued by corporations in the need of capital and are typically issued in denominations of $1,000 with terms of 1 to 30 years. Unlike stocks, bonds do not give the holder ownership interest in the corporation, as they are simply a tool used to lend the corporation funds they need to meet their goals.