How are bonds different from stocks?

Stocks and bonds are quite different in the financial world since stocks represent a partial ownership of a company, while bonds represent debt owed by a company to the bond holder. In some respects they do seem similar however. Both are used to raise capital. And both can give investors regular income since bonds pay out the interest payments to the holder, while stocks often pay dividends. Of the two stocks are far more common in the open market, and typically only the largest blue chip companies will have bonds that trade on public exchanges.

Which bonds are best to trade?

There are a number of different types of bonds, from corporate bonds issued by individual companies, to municipal bonds that are typically issued to pay for a specific project, such as improvements to schools, to government Treasuries which fund the Federal government. At their heart they are all the same, they are all debt instruments. So which are best to trade? Rather than considering the source of the bond it is helpful to consider the ranking instead. There are three major bond ranking agencies, Standard & Poor's, Moody's, and Fitch. They all use a similar ranking method and the higher a bond is ranked, the safer it is. However lower ranked bonds are often better for trading as investors can be willing to pay more as they chase the yield.

What are some bond trading strategies?

There are a number of bond trading strategies with names like swaps, barbells, and ladders. Each has a specific function, for example the swap is often used to lower an investor’s tax liability, or to simply improve the yield being collected. A ladder is used to smooth out interest payments over a period of time. A barbell uses primarily very short and very long maturity bonds for diversification and flexibility. One profitable strategy is called rolling down the yield curve. As long as bonds with short maturities yield less than those with long maturities it is profitable to buy the long dated bonds and then sell them after 2-3 years, collecting a profit and reinvesting the proceeds in new long term bonds.

Differences Between Stocks and Bonds

Trade CFD Bonds & Treasuries

AvaTrade offers a focused range of US, European and Asian government bonds (also known as treasuries or securities) to trade as CFDs on Meta Trader 4 and MetaTrader 5.

With competitive spreads and leverage of up to , there’s no better place to start trading bonds and treasuries than with one of the best forex brokers.

Japanese & European government bonds
Competitive spreads
Leverage of up to
Go long (buy) or short (sell) – trade the market your way
Both manual and automated trading platforms available, including expert advisors trading bots for MT4

Start trading government bonds with AvaTrade AU and enjoy the benefits of trading with a regulated, award-winning broker!

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Trading Bond CFDs

AvaTrade allows you to speculate on the shifting value of common government bond futures, such as the US 10-Year T-Note, through CFD trading.

A CFD (contract-for-difference) is a type of derivative that allows you to speculate on the price of an underlying asset – in this case a government bond future contract – without actually owning the asset itself.

The advantage of CFD trading is that you can trade long (buy) or short (sell) easily, and trade with leverage to take a bigger position, all from a common online trading platform such as MetaTrader 4.

Start trading bonds with AvaTrade AU and enjoy the benefits
of trading with a regulated, award-winning broker!

Create Account or Continue with Demo

All forms of investments carry risks and trading CFDs may not be suitable for everyone. CFDs are leveraged instruments and can result in losses that exceed deposits, so please ensure that you fully understand, and are aware of, the risks and costs involved.

AvaTrade currently offers the following treasuries:

Euro-Bund
Japan Government Bond

Remember that trading carries significant risks. It is not suitable for all investors and you could lose your initial investment. The information on this website is general in nature and doesn’t take into account your personal objectives, financial circumstances, or needs. Before acting on the advice, you should consider whether the advice is suitable for you having regard to your objectives, financial situation and needs. Seek independent advice if necessary.

When acquiring our derivatives products, you have no entitlement, right or obligation to the underlying financial assets. Past performance is no indication of future performance and tax laws are subject to change.