I have $5m at IB, almost all in index funds and Berkshire Hathaway. I'm interested in borrowing $2m against that to loan to an acquaintance (I'm comfortable with the collateral). Are there cheaper ways than just taking a margin loan? I started wondering about this after reading IB's announcement last month about being able to short US Treasuries. The $10m minimum is more than I want but I'd love to be able to borrow at 1.13%.
You can try to see if IB or any other bank is willing to issue you a banker's guarantee after you give them your shares as collateral.
Can you expand on that, preferably with real numbers from tradeable products and some discussion of commissions?
Yep, sell as wide a box as you can on SPX options on the COB. They quote way wider than you'd expect for exactly this purpose. You end up paying just above treasury rates baked into the slightly lower price you get for the box then it will give you at expiration. Of course as a box it has no market risk. One note is that you have to sell the box then buy your stock to take advantage of the margin on the box. You can enter some orders in a paper trading account to see exactly how it works mechanically.
A bit simpler said: If you have an (unleveraged) margin account like you have now, and you sell an option (i.e. any option you want) you get "free cash" (i.e. cash against a competitive rate). If you sell a "box" (usually with a combo order) the sold options are risk free. If you do index options (like SPX) you don't have some small problems you could have with equity options.
I'd note that it you might want to price the rate your friend will pay on the same day as you sell the SPX box. Its likely that either the Fed will cut rates or that they wont (but the market is pricing cuts) and this can affect market rates quite a bit
Can you do a box on SPX for 1M for 1 year and use it to fund purchase of AAPL? Does margin financing on IB work this way?
I tried selling a box spread. While I seem to get a 200K cash credit, the same amount would be added to both initial and maintenance margin. So at least on a Reg T margin account, it doesn't seem to increase buying power?
Yes, of course. This should work the same with any serious broker. Maybe bucket shops use their own set of (disadvantageous) rules... Note that proceeds from short stocks are not usable for financing long stocks (obviously that's a different "cash bucket").