Governments, corporations and other institutions issue bonds (debt obligations) in the public debt markets for a fixed period of time to finance their projects and honour other liabilities. Bonds are made available in the secondary market through brokerage firms. Traders can benefit from the bond price, the bond market volatility, coupon payments (dividends), bond yield and potential credit upgrades. The issuer (borrower) must pay back the bond price (face value), interest rate, and a fixed or variable interest payment (dividend) to the bondholders on the bond maturity date.

High Bond Yields - Low Bond Prices
Low Bond Yields - High Bond Prices

Treasury bonds and agency bonds are short-term (1-5 yrs), intermediate-term (5-12 yrs), and long-term investments (12-30 yrs). A bond rate is fixed at its purchase, and the bond issuer must pay interest regularly until the bond maturity, in which the original sum of the investment must be paid back to the bondholders in addition to a variable or fixed interest. Bond investing is used as an effective portfolio diversification strategy, used to pick up bond yields by trading volatility (spread betting strategy) and seize any potential bond price increase from a credit upgrade. Bond CFDs offer traders the possibility to re-sell bonds when interest rates are increasing without the need to hold onto them until the maturity date.

Bond trading allows traders to re-sell before the maturity date and is mainly used as a portfolio diversification and spread betting strategy (pick up bond yields) due to less volatility and fewer risks. Bond investing offers the possibility to benefit from potential credit upgrades, bond price movements, and fluctuations since traders can re-sell bonds when interest rates are increasing without the need to hold onto them until the bond maturity date. Investors usually find suitable bond funds and hold them for the long term.