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Bonds Trading

Trade Bond CFDs such as US 10 YR T-Note Futures (US10YR) & UK Long Gilt Futures (GILT) on Metatrader 5

What is bond trading, and how does it work?

A bond is an over-the-counter exchange-traded fund (ETF) and fixed-income investment vehicle authorised by governments and corporations (IOU) as debt securities (Coupon and Zero-coupon bonds) for a specific time period, primarily to start paying down other debts and help finance operational processes through secondary market brokerage firms.

Bond trading refers to the ability of bond investors and traders (lenders) to purchase and sell corporate and government bonds (bond issuers) in the bond market (public debt market). On the bondholders' maturity date, the issuer (borrower) must repay the bond price (face value), interest rate, and a fixed or variable interest payment (dividend) to the bondholders. Bond investing is among the most efficient financial diversification strategies, according to traders.

Bond Markets: There are several different types of bond markets:
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Bonds from emerging markets

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Bonds backed by mortgages (MBS)

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Bonds issued by municipalities (Munis)

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Bonds of the government.

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Bonds issued by corporations (sometimes known as high yield bonds or junk bonds).

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Bond Indices (Investment grade bonds, Guaranteed bonds, Secured bonds)

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What is the procedure for trading bonds?

Treasury and agency bonds are fixed-income securities established by governments and corporations for a specific length of time and sold to investors who could buy bonds as debt obligations and profit from bond price and market volatility, coupon payments (dividends), and yield to maturity.

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Bonds with a short maturity date (1-5 yrs)

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Bonds with a medium-term maturity (5-12 yrs)

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Bonds with a long maturity (12-30 yrs)

Bond trading is primarily influenced by stock market conditions and liquidity, interest rate risk, new bond issuing, and the credit quality, risk, and rating of bond issuers. Bond funds are much more unpredictable because their price and interest rate are not fixed. The bond's price is inversely proportional to interest rates.

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Bond yields are high, while bond prices are low.

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Bond yields are low, but bond prices are high.

The interest rate on a bond is determined at the time of purchase, and the bond issuer should pay it on a regular basis until the bond matures, at which point the bond investors must receive their initial investment back.

Why Should You Trade Bond CFDs?

Since bonds provide a predictable income flow - bond coupon - as fixed-income assets, bond markets have lower volatility than stock and other markets. Bonds with lower coupon rates, on the other hand, are more unpredictable than those with higher coupon rates.

Considering the low instability of bond trading, each individual bond's known features, and fixed coupon payments, many investors use bonds as an efficient financial diversification method, benefitting from the bond markets' lower fluctuations, liquidity, and risks. Until optimal portfolio diversification is achieved, investors frequently hold bond CFDs to maturity in order to secure their funds and profit potential, as the original amount invested in bonds trading will be repaid by the bond issuer.

Regardless of the sort of investment, there are always hazards while trading. When governments and firms start issuing bonds or risk default, bond prices could be impacted negatively. Bonds trading could also be used to pick up bond yields by trading volatility (spread betting technique) or to take advantage of any prospective bond price gain due to a credit upgrade. Bond CFDs allow traders to resell bonds as interest rates rise rather than holding them until their maturity date.

A Prime example

Let's say you wish to trade CFDs on the US10YR, often known as the "US 10yr T-Note." Assume the US10YR is trading at BID 130.62 and ASK 131.76.

You decide to purchase 100 US10YR contracts because you believe the price of the US10YR will increase in the future. Your profit margin rate is 1%. This means you'll need to fund your margin account with 1% of the overall position value.

1% x (100 x 131.76) = 131.76 USD

If the bond price increases to 132.3/133.2 within the next hour, you have a profitable trade. Sell at the present (bid) value of US10YR, which is 132.3, to terminate your position.

( 100 x (132.3 - 131.76) = 54 USD
The Benefits of Trading Bond CFDs
  • Stability of income.
  • When compared to other kinds of trading, this is a safer investment.
  • There will be less technical analysis.
  • The issuer repays the bondholder's initial investment.
  • Bond CFDs can be resold before the bond's maturity date.
  • Portfolio Diversification Technique That Works
  • Long-term financial commitment
Bonds Spreads
SymbolProductStandard A/CRaw ECN A/c
MinAvgMinAvg
GILTUK Long Gilt Futures0.430.430.430.43
US10YRUS 10yr T-Note Futures0.440.470.440.47
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Incorporate : The Registrar of Companies for England and Wales, hereby certifies that WAVFX TRADING INDEX LIMITED is this day incorporated under the Companies Act 2006 as a private company, that the company is limited by shares, and the situation of its registered office is in England and Wales. Given at Companies House, Cardiff, on 25th September 2005. The objects of the Company are all subject matters not forbidden by International Business Companies (Amendment and Consolidation) Act, Chapter 149 of the Revised Laws of Saint Vincent and Grenadines, 2009, in particular but not exclusively all commercial, financial, lending, borrowing, trading, service activities and the participation in other enterprises as well as to provide brokerage, training and managed account services in currencies, commodities, indexes, CFDs and leveraged financial instruments.

Risk Warning : Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is a possibility that you may sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.