BONDS AND INTEREST RATES - MARKET INFORMATION

Use the table below to find out all you need to know about spread betting on bonds and interest rates with Spreadex.

Use the tab sections to access the market information you require for each product or click on the product name to find a full description of the product.

how to

understand how an INTEREST RATE spread bet WORKs

The price of the contract is always 100 minus the relevant interest rate.

Therefore if the UK Short Sterling quote was 98.5 it would represent an interest rate of 1.5%. Spread betting on this works the opposite way to spread betting on other financial instruments – if you thought rates were going to drop to 1% you would buy the quote with the expectation of the price moving to 99. If, on the other hand, you expected a rise in interest rates to 2% you would sell the quote with the expectation of the price moving to 98.

Since Bond prices rise when interest rates fall, you would buy these contracts if you expected the relevant interest rate to fall and sell if you expected rates to rise.

how to

understand the close out level on interest rate trades

We operate an automatic close out policy which means that some or all of your positions may be closed without notice to you if your account reaches the Close Out Level. Please see Rule 22 of our Customer Agreement.  The Close Out Level is reached if your aggregate Available Balance is a negative figure.

You can reduce the risk of your account reaching the Close Out Level by ensuring you have sufficient cash in your account, or by reducing some of your positions – this is particularly important in volatile markets or if you are travelling.

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us 10 year note

US Treasury notes are US bonds with a remaining term to maturity of between six and a half years and 10 years, from the first day of the delivery month.

With Spreadex, you are trading on the 10 Year note futures and spread bets are placed in movements of £1 per 1/32 of a point.

It is important to understand the inverse relationship between bond prices and yields. As prices rise, rates fall.

When placing a financial spread bet on bonds, you would place a ‘buy’ trade on the 10 Year Note future if you think rates will fall and a ‘sell’ trade on the 10 Year Note future if you expected rates to rise. It is important to note that you are trading on long-term interest rates rather than bank base rates.

In general terms, government bonds are lesser known products when it comes to financial spread betting but they can still attract plenty of interest, especially in uncertain economic times with the collapse of the financial markets and interest rates, for example.

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us t-bond

This US bond has a maturity of 10-30 years, but is otherwise very similar to the Treasury Note.

A spread bet with Spreadex on the future of this bond is based on price movements in increments of 1/32 of a point.

30 year fixed-interest securities generally experience more volatility than the 10 year counterpart. Since bond prices rise when rates fall, in spread betting you would place a ‘buy’ trade on the T-Bond future if you expected long term rates in the US to fall and a ‘sell’ trade on the T-Bond future if you expected long term rates to rise.

It is important to note that you are trading on long-term interest rates rather than bank base rates.

In general terms, government bonds are lesser known products when it comes to financial spread betting but they can still attract plenty of interest, especially in uncertain economic times with the collapse of the financial markets and interest rates, for example.

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Euribor

The Euro Interbank Offered Rate, or Euribor, is a daily reference rate based on the average rates at which banks offer to lend unsecured funds to other banks in the euro wholesale money market.

This rate can differ from the base rate. Placing a financial spread bet on a short-term interest rate may seem counterintuitive at first, as the price of the contract is 100 minus the interest rate.

For example, an interest rate of 2.5% will make a price of 97.5. If you thought interest rates would rise, then you would place a ‘sell’ spread bet on the Euribor 3-month future. Likewise, you would place a ‘buy’ spread bet on the Euribor 3-month future if you thought interest rates would fall.

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eurodollar

Eurodollar refers to all deposits denominated in US dollars and held in banks anywhere outside the United States, not just Europe.

The 3 month Eurodollar rate is a daily reference rate based on the average interest rates at which non US banks offer to lend unsecured US dollars to other banks in the global money market.

This rate can differ from the base rate. Spread betting on a short-term interest rate may seem counterintuitive at first, as the price of the contract is 100 minus the interest rate.

For example, an interest rate of 2.5% will make a price of 97.5. If you thought interest rates would rise, then you would place a ‘sell’ spread bet on the Eurodollar 3-month future. Likewise, you would place a ‘buy’ spread bet on the Eurodollar 3-month future if you thought interest rates would fall.