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Bond Contracts for Difference

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What is bond exchange?

Bonds are a type of over-the-counter trading fund (ETF) Fixed income financial instruments, By companies and governments (IOU) As a debt security (Coupon and zero coupon bonds) , Issued within a certain period of time, Mainly used to repay other debts and operating funds through brokerage firms in the secondary market.

Bond trading refers to allowing bond investors and traders (lender) In the bond market (Public Debt Market) Buying and selling corporate bonds and government bonds (Bond issuer) . issuer (borrower) The bond price must be repaid to bondholders on the maturity date of the bond (nominal value) , Interest rates and fixed or variable interest rates (dividend) . Traders believe that bond investment is one of the most effective portfolio diversification strategies.

Types of Bond Markets:

  • Emerging market bonds

  • Mortgage backed bonds (MBS)

  • Municipal bonds (Munis)

  • government bonds

  • corporate bonds
    (High yield bonds or junk bonds, Investment-grade bonds, secured note)

  • Bond Index

How bond trading operates?

Treasury bond and institutional bonds are fixed income securities issued by governments and enterprises within a fixed period, Selling bonds that can be purchased as debt obligations and taking into account bond prices and market fluctuations, Coupon payment (dividend) Investors who profit from the yield to maturity. Bond trading is mainly influenced by stock market conditions and liquidity, interest rate risk, New bond issuance, Credit quality of bond issuers, The impact of credit risk and credit rating. Bond funds have greater volatility, Because they do not have fixed prices and interest rates. The price of bonds is inversely proportional to the interest rate.

short-term bond (1 - 5 year)



Mid term bonds (5 - 12 year)


long-term bonds (12 - 30 year)

High bond yields - Low bond prices

Low bond yields - High bond prices

The interest rate of bonds is fixed at the time of purchase, The bond issuer must pay interest on a regular basis, Until the bond matures, The original investment amount must be returned to bond investors.

Why Trade Bond Contracts for Difference?

The volatility of the bond market is lower than that of stock trading and other markets, Because bonds, as fixed income securities, provide predictable income streams - bond coupon. however, Bonds with lower coupon rates have greater volatility than bonds with higher coupon rates.

Given the low volatility of bond trading, Known details and fixed coupon payments for a single bond, Most investors tend to view bond trading as an effective portfolio diversification strategy, Thereby reducing volatility, Liquidity and Risk. To achieve appropriate portfolio diversification, Investors typically hold bond contracts for difference until maturity, To ensure their funds and potential profits, Because the initial amount invested in bond trading will be repaid by the bond issuer.

however, Regardless of the type of investment, Risk always exists during trading. When the government and enterprises issue new bonds or experience risk default events, Bond prices may be negatively affected. Traders can also use bond trading to trade volatility (Spread trading strategy) To obtain bond yields, Or seize any potential increase in bond prices brought about by credit upgrades. Bond price difference contracts provide traders with the possibility of reselling bonds when interest rates rise, And there is no need to hold bonds until the maturity date.

Example of Bond CFD Trading

Assuming you want to trade a contract for difference, The underlying asset is "America 10 3-year treasury bond" , Let's assume that its selling price is 130. 62, The buying price is 131. 76

us10-year-ask-price

You have decided to purchase 100 The United States 10 3-year treasury bond bond contract, Because you believe its price will rise in the future. Your margin rate is 1%. This means that you need to calculate the total position value 1% Deposit into your margin account.

Within the next hour, If the bond price moves to 132. 3/133. 2, So your transaction will be profitable, You can use the current selling price (approach 132. 3) Sell the contract to close the position.

The advantages of trading bond price difference contracts

• Fixed income guarantee

• Compared to other types of transactions, Investment is safer

• Less technical analysis

• The issuer returns the initial investment to bondholders

• Can resell bond price difference contracts before the bond maturity date

• Effective portfolio diversification strategy

• long-term investment

Bond spread

Trading product code Trading products   standard account
    Minimum spread Average Spread
GILT GILTS 0 0. 07
US10YR America 10 3-year treasury bond 0 0. 08

Contract for Difference in Bond Trading (Bond CFD) Allow investors to comply with government regulations, Trading fixed income securities issued by companies and other institutions as debt at prices, Without the need to purchase actual underlying assets. Bond price difference contracts are provided to traders through brokerage firms in the secondary market, Mainly used for long-term investment, Diversification of investment portfolio and spread trading strategy. Bond price difference contracts provide traders with the possibility of reselling bonds when interest rates rise, And there is no need to hold bonds until the maturity date.