If I purchase foreign bonds will IB mark me to market on my currency exposure. i.e. I buy 1MM face of UK Govt. Bonds and the GBP then depreciates 50% in 1 day. Will I be showing a loss of 500K on my USD/GBP exposure or will it not show a loss until I sell the bonds? Thanks.
Do you mean buying the bonds on margin or as a cash transaction ? If the former then surely just buying the bond future would be cheaper and if the later then I can't see any margin required for the trade - if you then use the bonds as margin for other positions I'm pretty sure they will mark the bond's value to market and an exchange rate movement could cause a margin call.
Your account value, margin and buying power are based on the value of your securities in your base currency. If you buy GBP denominated bonds from a USD account, then yes, your account will fluctuate due to exchange rate differencies. However, the margin requirement for such a security is probably very small so won't generally be something you need to worry about on a day to day basis.