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How Do I Trade Bonds?

Fees for buying and selling bonds vary broadly between Swiss banks and brokers, so it definitely pays to compare.

Bonds are interest-bearing debt securities, and typically form an integral part of diversified investment portfolios. Investors looking for immediate gains also trade bonds as short-term investment instruments.

In many cases bonds are issued by government institutions. These are known as government bonds. But businesses can also issue corporate bonds as a tool to raise capital.

Most government bonds and corporate bonds, but not all, can be traded through a stock exchange. Wealth managers and investors can buy and sell bonds through a bank or brokerage firm.

Bond issue costs and stock market rates are not the only costs that have to be taken into account when trading bonds on the stock market. A common mistake made by many investors is that they fail to account for the added cost of bond transaction fees when calculating projected dividends, but these fees directly impact your profits.

Most Swiss banks charge brokerage and custody fees ranging from the high to the very high end of the scale, and those fees cut into your earnings. Bond trading fees charged by many Swiss banks are similar to those charged for trading shares. However, some brokers offer bond transaction fees that are somewhat lower than stock trading fees.

The differences in fees charged by various trading platforms are worth noting. For investors who trade frequently or buy and sell large amounts of bonds, the difference in fees charged by the most expensive banks compared to the cheapest online brokers can amount to thousands of francs. Needless to say, a thorough comparison of fees is highly recommended.

For example, buying and selling a 100,000 franc bond with Swissquote Bank will cost 220 francs per transaction. That comes to 440 francs plus stamp tax. Trading the same bond with TradeDirect costs a lower 199.90 francs per transaction.

UBS charges 0.7% of each transaction for trades in Swiss bonds worth 100,000 francs. That comes to a hefty 700 franc fee per transaction, or a total of 1400 francs plus stamp tax (an additional 25% discount applies to transactions made using online banking).

You can easily compare bond trading fees using the interactive and completely neutral broker comparison tool offered by moneyland.ch. Simply select «Swiss bonds» from the «profile selection» list. You can customize the bond value and the number of transactions you expect to make under «individual profile».

More information:
Trading comparison tool
Medium-term notes compared
Swiss custody fees compared
Stock trading for free?
Stock market profits: taxable or not?
Structured products compared

About Moneyland Magazine

The moneyland.ch magazine provides accurate, unbiased information on topics related to finance and money. In addition to research and expert interviews, the magazine contains numerous financial guides.