Bonds

What are bonds?
Trading bonds is one of your options when it comes to CFD trading. Bonds provide a way in which to speculate on long-term interest rates.

All about bonds trading
Bonds, although tied to interest rates, are slightly different. There are two main types of bonds - government and private. The former are issued by national governments as a means of borrowing money, while the latter perform the same function but are issued by private companies.

CFD trading on bonds usually takes place on government-issued contracts, enabling traders to speculate on the long-term performance of a country's interest rates.

Economic forecasts, statistics relating to inflation, unemployment or gross domestic product growth and any other factor that affects the financial standing of a nation will all have an impact on bond prices.

Bonds CFD examples
When you open a CFD you can choose to either go “long” or “short” depending on whether you expect the price of the instrument to rise or fall.
A 'LONG' TRADE - YOU EXPECT THE PRICE TO RISE
US T-Bond Future is trading at 13470 – 13472.
You think that the US T-Bond will go up so you decide to place an order to buy 40 CFDs at 13472. This means that for every point the price of US T-Bond moves, you will enter a profit or loss of $40.

Scenario A
Your prediction was right and the price of the US T-Bond rises to 13550-13552. You close your position at 13550. The difference between your buy price 13472 and your sell price of 13550 is 78 points, therefore you make a profit of $3120 (78 x your 40 CFDs stake).

Scenario B
Your prediction was wrong and the price of the US T-Bond falls to 13410-13412. You close your position at 13410. The difference between your buy price 13472 and your sell price of 13410 is 62 points, therefore you make a loss of $2480 (62 x your 40 CFDs stake).

A 'SHORT' TRADE - YOU EXPECT THE PRICE TO FALL
The Bund Future is trading at 14340 – 14342
You think that the Bund Future will fall so you decide to place a trade selling 20 CFDs at 14340. This means that for every point the price of the Bund Future moves, you enter a profit or loss of $20.

Scenario A
Your prediction was right and the price of the Bund Future falls to 14285-14287. You close your position at 14287. The difference between your sell price 14340 and your buy price of 14287 is 53 points, therefore, you make a profit of $1060 (53 x your 20 CFDs stake).

Scenario B
Your prediction was wrong and the price of the Bund Future rises to 14426-14428. You close your position at 14428. The difference between your sell price of 14340 and your buy price of 14428 is 88 points, therefore, you make a loss of $1760 (88 x your 20 CFDs stake).