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How to Strategically Short Bonds


Anna Segal   Written by Anna Segal

Bonds, traditionally seen as stable income-generating securities, have evolved in today's dynamic investment landscape. Their prices, influenced by an array of market determinants, vary, providing opportunities to profit not just from their rise but also from their fall. This article delves into the intricacies of shorting bonds, beginning with a brief overview of bonds and culminating with ways to capitalize on their downtrends.

A Primer on Bonds

Bonds represent debt instruments employed by entities like governments, local authorities, and corporations to amass capital for diverse undertakings. Simplistically, think of bonds as structured loans. They come with a preset maturity date and fixed interest payouts. The entity issuing the bond commits to returning the loan amount (face value of the bond) upon maturity to the bondholder, who in turn receives periodic interest, typically semi-annually.

Diverse Bonds for Varied Appetites

Government or Sovereign Bonds:

Backed by nation-states, these are perceived as the gold standard of bonds due to their low default risks. However, not all are created equal in terms of credibility. U.S. Treasuries are exemplars of this category, offering:

Municipal Bonds:

Corporate Bonds:

As the name suggests, these are floated by businesses, primarily to fund expansions or augment operational capacities. Based on creditworthiness, they're segmented into:

Decoding the Bond Market

Broadly, the bond market bifurcates into the primary and secondary spaces.

The Mechanics of Short Selling

Contrary to the conventional 'buy low, sell high' approach, short selling thrives on a 'sell high, buy low' mantra. In essence, investors borrow assets, sell them, and then repurchase them at (hopefully) reduced prices to return to the lender, retaining the price difference.

Shorting Bonds: The How-To Guide

Bond CFDs (Contracts-for-Difference):

Inverse Bond ETFs (Exchange Traded Funds):

Capitalize on Bond Downtrends with Vantage

Harness Vantage's Contracts-for-Difference (CFDs) to speculate on leading U.S. and EU bonds. Begin with a small investment and seize opportunities in all market climates, whether bullish or bearish. Embark on your trading journey today!


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