2019: TD Ameritrade fixed income investing: Treasury, Corporate, Municipal bonds, CDs, Agency Debt commissions and fees.

Fixed Income Trading on TD Ameritrade

TD Ameritrade offers a wide range of investment options on its platform when compared to the competition, and so it’s no surprise that they offer basic fixed income investments as well. This is a nice bonus of a TD Ameritrade account because many brokers do not offer the ability to buy bonds directly. This article will cover the different types of fixed income securities you can trade on TD Ameritrade and then we’ll walk you through finding the right bond and placing the trade.

TD Ameritrade Corporate Bonds

As the name implies, corporate bonds are issued by corporations that are looking to borrow money for special projects or for general business operations. Corporate bonds rated BBB and above are referred to as “investment grade” debt because the issuing companies are seen as financially stable and likely able to honor their debt obligations. Corporate bonds rated below BBB are considered “high yield” or “junk bonds” because the companies issuing these debt obligations are perceived as being more risky and their ability to repay their debts may be forecasted as more uncertain.

TD Ameritrade Municipal Bonds

Municipal bonds, or simply “munis”, are issued by U.S. states and cities to fund specific local government projects and initiatives, like infrastructure development. They follow the same credit rating scale as corporate bonds, except the muni rating reflects the issuing city’s expected ability to honor their debts. One advantage that munis offer investors over other bonds is that they are exempt from Federal income tax and in most cases from State income tax as well.


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TD Ameritrade Agency Debt

Agency bonds are debt issued by U.S. Congressional entities (like Fannie Mae and Freddie Mac) to provide loans to certain groups of borrowers, such as homeowners. Because the debt is issued by government-sponsored entities it comes with an implicit guarantee of repayment with the full faith of the U.S. government.

U.S. Treasuries

U.S. Treasury bonds are issued by the U.S. federal government and fund the government’s daily operations along with tax revenues. They are also backed by the full faith of the U.S. federal government and therefore are rated very highly and are often considered to be a cash equivalent. The market for U.S. Treasuries is one of the most liquid markets in the world as these debt securities are held by American and foreign institutions alike, and by both corporate and government entities.

Certificates of Deposit (CD)

CDs are short-term certificates issued by banks or thrift institutions that pay a fixed interest rate to borrow your cash. These are just like the CDs you can buy from a bank, except the ones on TD Ameritrade are called brokered CDs because they can be traded.

What Are the Fees for Trading Bonds?

With the exception of U.S. Treasuries, which are commission-free, TD Ameritrade charges commission for fixed income securities on a net yield basis. They can act as either a principal or an agent when executing your fixed income trades. When acting as a principal, TD Ameritrade will add a mark up or down to the total cost they quote you for your buy or sell order. When acting as an agent, TD Ameritrade will charge you $1 per bond or CD ($5 minimum and $500 maximum per trade).

How to Find the Right Bond

Now that you know what fixed income investments are available on TD Ameritrade, let’s take a look at how to find the right bond for your portfolio. TD Ameritrade has a tool called “Bond Wizard”, which is a 5 step process that asks you questions about the types of bonds you are looking for (i.e. your desired maturity, credit rating, coupon, etc.).

Ameritrade Bonds Wizard

After you get through the Bond Wizard, it will provide you with the top 5 results and also a complete list of all the bonds that met your criteria.

Ameritrade Fixed Income

How to Place the Trade

Now that we’ve gone through the Bond Wizard and can see the issues that meet our criteria we are ready to go ahead and place a buy order. Let’s say we want to buy 10 bonds ($10,000 par) of Washington Prime Group LP (Cusip 939648AE1), so we go ahead and click on this bond from the top 5 list and the below screen will pop up. We simply enter a quantity of 10 and the highest price we are willing to pay per $100 of par – which in our case is $94.10. Next, click on “calculate total cost” to see your total trade cost. It’s important to note that the price you are entering is a clean price, so to the extent the bond has any accrued interest you can see in the screenshot that this is listed separately and added to your total cost basis. Next, just review the trade and hit “submit”.

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