Bonds Trading

Bond trading involves risks such as interest rate, inflation risk, market volatility and credit risks. To attempt minimising these risks, it's crucial to conduct thorough research, have a well-defined trading strategy, and practise sound risk management.

Here are a few potential advantages of bond trading: Potential opportunities: Bond trading provides traders with potential opportunities due to the fixed interest rate of regular coupon payments that come with bonds.Greater liquidity: Bond markets can offer higher liquidity compared to certain other trading options, allowing traders to easily buy or sell bonds and adapt to market conditions.Bond trading also comes with some risks. Traders should prioritise conducting thorough research and understanding the risks associated with bond trading before making any trading decisions.

Bonds and stocks are two distinct financial products that are traded in the market. Bonds serve as trading instruments that represent a loan provided by an investor or trader to a borrower, typically a corporation or government body. Stocks on the other hand, represent partial ownership of a company. If the company experiences good performance, the value of your stocks could have the potential to increase based on market supply and demand. While there are some similarities between the two, given that they are both financial instruments used to raise capital, they operate in fundamentally different ways and have their own market risks. You can tap on our library of free educational materials to better understand the difference between bonds and stocks.

Government bonds and corporate bonds generally pay fixed interest rate to investors. They are issued by governments and corporations to generate funds. In exchange for the money they receive, bondholders receive regular interest payments and get back the initial amount invested when the bond reaches its maturity date.However, they also do differ in several ways:Issuer: As their names suggest, government bonds are issued by governments, either at the federal or local level; while corporate bonds are issued by corporations.Credit Risk: Government bonds are backed by the government's full faith and credit. On the other hand, corporate bonds come with a higher risk of default since companies could potentially go bankrupt and default on these loans.Interest Rate: Due to the higher risk, corporate bonds often offer higher interest rates than government bonds to compensate investors for the increased risk.

When using Vantage, you have the option to begin trading with a minimum deposit of USD$50. However, the specific amount required to trade bonds will vary based on factors, such as the type of bonds, leverage used, and your personal risk tolerance.