Quote:
Originally Posted by daniel200
I prefer to purchase Treasuries on the secondary market (Fidelity) and not newly issued bonds. A bond that was issued at 1% will trade at a discount so that its total yield to maturity (interest plus capital gains) is similar to current yields (about 4.6% for a 2 year t-bill) … So if I buy a 1% bond that matures in 2 years; I will pay taxes on the 1% interest yearly. When the bond matures in 2 years, I will have a long term capital gain of (4.6% - 1%) x 2 = 7.2% when i file my taxes
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this is called tax efficient investing, whereby you buy for capital gains versus interest income, using the same instruments, treasury or corporate bonds. .