Bonds & Interest Rates
Government bonds have long been the domain of the professional investor however they are now becoming increasingly popular among savvy retail investors as a means to balance their investment strategy between more volatile instruments such as Stocks & Shares, Commodities or even Foreign Exchange.
Bonds are investment securities, which are issued by Governments and Companies as a way of raising capital.
In the traditional Bonds market investors are guaranteed the return of their principal after a defined period of time, and elect to invest in bonds as they have a potential to deliver an interest amount above the principal investment. They are also known as fixed income securities by many investors.
Spread betting on a bond or an interest rate allows you to place a bet on the price or yield of the security as either a daily, monthly or quarterly spread betting trade.
With ETX Capital you can spread bet on a variety of instruments ranging from Gilts to Euro Bunds, Guaranteed Bonds, Fixed Rate Bonds and interest rates including Euribor and Short Sterling. We also offer a range of other financial spread betting products
Trading Example
A customer calls ETX Capital to enquire how he can take advantage of a downward move in the German Government Bond market.
The customer believes that the 10 year bond is going to trade lower over the next few months and would like to bet on this view.
ETX Capital offers a price of 121.30 to sell and 121.34 to buy. The client decides to sell £30 per tic of the Dec Futures contract at a price of 121.30 (this is the nearest contract to trade as they are quarterly contracts i.e. Mar, June, Sept, Dec).
The customer watched the market for over 3 weeks and the price action was very slow and due to a government decision the Bond starts to trade higher to a price of 121.62. The customer decides to close out the trade and ETX Capital quote a price of 121.64 for the customer to buy.
The customer closes out of the trade by buying £30 per tic at 121.64 realising a loss of 34 tics (121.64 - 121.30) x £30 = (£1020.00). Had the market moved in their favour, the client would have realised a profit.
Government and Exchange traded Bonds
- UK - 10 Yr Gilt
- US - 10 Yr Note
- Euro - Bobl, Bund, Schatz
- Euribor
- Eurodollar
- EuroSwiss
- Short Sterling
Member of the London Stock Exchange. Authorised and Regulated by the Financial Services Authority, FSA registration number 124721.
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