How to trade government bonds

1. Open your account

To trade bonds, you’ll need an account with a leveraged provider. You can open a CFD trading account.

There’s no obligation to fund or trade when you open a leveraged account, but you will need to deposit some funds before you open your first position. Doing so is simple, with options to add funds via a bank transfer or credit card.

2. Choose your bond

When investing in bonds, choosing a bond that pays in out a different currency to your own raises the issue of currency risk. But when trading bonds, you’re free to buy or sell assets from around the world. IG Bank’s platform, for instance, offers access to a wide range of government bonds, including:

•  Bund, Buxl and Schatz prices from Germany
•  Both long and short-term UK gilts
•  Two, five and ten-year T-notes from the US, as well as treasury bonds
•  Bonds from Italy, France and more

3. Decide when you want to trade

Once you’ve chosen the government bond you’d like to trade, it’s time to decide when you’d like to open your position. Timing the opening and closing of trades has a major part to play in dictating how successful you are on the markets.

The key to timing your trading is understanding what moves government bond prices. The biggest factor in government bond volatility is usually interest rates – and many traders will use bonds as a way of speculating on whether interest rates will go up or down.

Say, for example, that you believed that the FOMC was going to announce a surprise interest rate hike at its next meeting. An interest rate rise would typically cause US treasuries to fall, so you could open a short position just before the announcement.

4. Open your position

Once you’ve decided on your first trade, you’ll need to open your position using your provider’s online trading platform.

Once you’ve logged into the platform, find your chosen bond market by either searching for it or navigating through the available markets. Then you can open a deal ticket to choose how much you’d like to stake on the position, and whether you’d like to go long or short.

You might also want to consider adding a stop or a limit here. Stops automatically close your position once it moves a certain number of points against you, while limits close your position once it moves a certain number of points in your favour. Both can be hugely useful as part of your risk-management strategy.