Corporate bonds funds

See ICTax - Income & Capital Taxes for example. It’s taxed similarly to accumulating equity ETFs.

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Yes, I imagine institutional clients probably get better deals :slight_smile:

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I don’t want to finance US budget.

Only in nominal USD terms. Hedging or expected USDCHF depreciation will pull yield in CHF down to the same level as Swiss government bonds. That how it should work according to the effective market hypothesis and you should present me very convincing proof if you think that these markets are not efficient.

So I can turn your question around: why bother with US Treasuries if you either get more or less the same yield (before taxes) in CHF if you hedge or the yield in CHF is not known (but the expectation is that it should be the same) if you don’t hedge.

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The most convincing argument to me is so as to diversify the risk of the issuer.

As I understand it, there are two aspects why the performance of CHF-hedged foreign currency bonds may differ from CHF bonds (ignoring credit risk and short term currency fluctuations):

  • Yield curve: Funds typically use short term currency hedges (1-3 months). The yield difference between currencies for longer term bonds may not match the short term yield difference.
  • Interest rate / yield changes don’t happen in all currencies at the same time or by the same magnitude but they have a big effect on the valuation of (longer term) bonds

Either of these aspects can be positive or negative, however, they increase diversification, which may reduce volatility.

If anyone has more insight, please correct me.

I have 5% of AGGS (CHF-hedged global aggregate) in my investment strategy for diversification. The rest of my bond allocation is in CHF (SBI parts).

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I meant us Treasuries vs. Swiss government bonds, not corporate bonds. Both are absolutely safe. Sorry for the confusion.

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To stay on topic: here for example one global corporate bonds ETF, CHF hedged, if you want some more yield for more risk.

No, you’re right. Dividends are taxable either way (accreting or distributing), so my stated possible benefit isn’t a benefit.

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