Bond ~ nounA certificate of debt issued by a government guaranteeing payment of the original investment plus interest
Trading Government Bonds at ShortsandLongs.com
Government Bonds are the lesser known members of the financial spread betting family, but part of the ShortsandLongs.com family nonetheless.
There are two futures on Government Bonds available for trading with ShortsandLongs.com – the German Bund and the UK Long Gilt.
The German Bund futures contract began trading in 1998 and remains a heavily traded futures product throughout the world. The Bund future is based on the long-term debt product issued by the Federal Republic of Germany with a term of 8.5 to 10.5 years.
The German Bund has one of the highest liquidity rates in the European market, and trades in the months of March, June, September and December.
The UK Long Gilt is a Notional 10 year UK government bond similar to the Bund above.
The Credit Crunch and the subsequent series of interest rate cuts at the end of 2008 led to a big increase in trading in government bonds as investors fled to the relative safety they offer, giving spread betters opportunities to profit.
An investor who thinks that long term interest rates will fall and stay low would perhaps buy the Bund or Long Gilt, or if their view is long term interest rates are going to rise then they may decide to short the Bund or UK Long Gilt.