When you buy a bond, your money gets stuck for two to three days passing through custodians, clearinghouses, and settlement systems. Each intermediary takes a fee for almost no work. It's a hidden tax on every trade, built into a system that has no better alternative.
Think about what happens when a large institution buys a bond today. The transaction has to go through multiple intermediaries, custodians, clearinghouses, settlement systems. The actual transfer of ownership does not happen instantly. It takes maybe 2 or 3 business days to settle. Now, during that window, capital is tied up, counterparty risk exists, and every intermediary in the chain takes a fee for doing essentially nothing except being a trusted middle party in a system that requires trusted middle parties because there's no better alternative. Subscribe if you want to understand where finance is really going.
