Spread Betting on Interest Rates

By mosesbet · Filed Under Spread Betting 1 Comment 

Spread Betting on Interest Rates

Depending on the type of trader you are and your personality, you may want to start focusing on specific markets such as government bonds and interest rates.  The financial markets that you decide bet across are entirely up to you, whether that involves stock, shares, house prices, securities, commodities or a specific index like the FTSE 100, NASDAQ, WALLSTRT or DOWJONES.

Many traders prefer spread betting on interest rates and government bonds because they feel they are the much “safer” option.  Unlike traditional stock exchanges like the FTSE, interest rates tend to be less volatile and change slowly over time.  They are also more predictable, in that you research the current government’s fiscal policy or wait for periodical economic data to be pusblished to foresight changes in the markets.  For example, if the UK government releases data stating that unemployment figures are much higher than anticipated than you can gamble on interest rates lowering and government bond prices increases (the two are asymmetrical).  On the other hand, if we’re experiencing an economic boom or recovering much faster than anyone anticipated (with higher expenditure and people buying from retail stores) than the interest rates will be increased and government bonds will decrease.

To research information on the bond market, a great resource to start with is available at http://markets.ft.com/ft/markets/bonds.asp.  To research future interest rates you can have a look at the government’s future policies or manifesto.  Are they pro-business or anti-business for example?  Obviously a Conservative government is more likely to lower interest rates and spur on the city bankers than a liberal democrat government.  Realistically however it depends on economic situations and the state of the economy in general.

At Tradefair, you can spread bet on a number of interest rate markets and the future prices of leading government bonds.  You can place futures or gamble on government bond markets all over the world including UK Gilts, German Bunds or the US Treasuries.  In addition, you can speculate on short-term interest rates like LIBOR and Euribor.  Each of these markets will be displayed in your chosen currency when you signed up an account.

One final advantage for spread betting or trading on interest rate markets is to insure yourself from other spread bets (i.e. reduce your risk and exposure) on other markets.  For example, someone with a loan linked to the Libor rate could offset an increase in the exchange rate forcing his debt up by selling on the UK sterling.

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