Cum Dividend Bargains explained

For those who don't operate in the bond market,this expression might seem totally incomprehensible.

So just what does the phrase 'cum dividend bargain' actually mean then?

Well, this is a situation whereby the person or entity that buys the bond buys not only the bond itself, but also agrees to pay the seller for the dividend which has been earned to date.

And hence the phrase cum dividend, which is just latin for with - so think of it as with dividend.

You might wonder why someone would offer to do this, and the answer is to increase the chance that they will be able to buy the bond, if it is a bond that they want then they need to make it attractive to the seller, and one way in which to do this is to let them know that you will cover the divident on that bond to date!

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