Government bonds have a reputation for being solid, if somewhat dull assets. Although generally less volatile than shares and commodities, they still experience sharp moves from time to time that can be very worthwhile to trade.
What matters most for government bonds is the outlook for interest rates. When investors foresee hard economic times, they expect the authorities to cut interest rates in response. And when they think things will improve, they normally count on interest rates going up. Falling interest rates generally lead to higher bond prices, while rising rates lead to lower prices.
Certain periodic releases of key economic data are among the most important events for government-bond traders. For example, an unexpectedly big rise in American unemployment can push up US government bond prices. Or, if German shoppers are spending more than everyone thought, that might well send the bond market there lower. A good roundup of essential bond information is available at http://markets.ft.com/ft/markets/bonds.asp
With Tradefair Spreads, you can spread bet on the futures prices of leading government bonds, such as US Treasuries, UK Gilts and German Bunds. You can also speculate on short-term interest rates like LIBOR and Euribor. Regardless of which country's bonds you're trading, your stake will be priced in your chosen currency, so you don't have to worry about currencies going against you.
As well as simply trying to ride up or down moves in bond prices or interest rates, spread bets on these products could be used in order to reduce investment risks elsewhere. Someone with a loan linked to, say, the LIBOR rate could guard against the risk of rate rises pushing up his repayments by doing a "sell" bet on a Short Sterling contract. Likewise, a saver who was fearful of interest-rate falls reducing his income could protect himself against falls by doing a "buy" bet on a related interest-rate contract.
The information in this article is for educational purposes only, it does not constitute advice and should not be construed as solicitations of any order to buy or sell. Past results are not necessarily indicative of future results.