3 Benefits of a Bond Swap

Using a bond swap can provide you with a number of advantages in the bond market. Here are a few benefits of using a bond swap.

1. Account for Interest Rate Changes

One reason that you might want to consider using a bond swap if so that you can maximize or minimize the effect of interest rate changes on your bonds. If you think that interest rates are going to increase, you could swap your bonds to more short-term bonds. This would minimize the impact of interest rates on your bonds.

2. Tax Efficiency

Another reason that you might think about swapping a bond is so that you can take advantage of tax efficiency. For example, you could sell a bond at a price that is less than what you paid for it in order to take a loss. By taking a loss, you are going to be able to save money on your taxes. After you sell the bond, you can purchase another bond to complete the swap.

3. Get a Better Quality Bond

Corporate bonds are rated on a scale that is issued by MorningStar and other financial publications. You might want to trade up to a higher quality bond for your portfolio.

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