Bond trading offers a diversification method few retail traders use, but the rise in interest rate volatility, causing yields to move more aggressively, has started to make bond trading more attractive. My best bond brokers listing introduces bond trading to beginners, including the pros and cons and how to get started with it.
- OANDA, Solid services + excellent currency converter.
- IC Markets, a top choice for active traders.
- IG Markets, No withdrawal fee.
- Pepperstone, Great ECN execution on MT4 platform.
- AvaTrade, Highly regulated, choice of fixed or floating spreads.
OANDA
In Summary Solid services + excellent currency converterOanda ranks among the best bond brokers on my listing for traders seeking to diversify their Forex portfolios with bond CFDs. The 28-plugin upgrade for MT4 ensures traders have a cutting-edge trading environment, and Oanda offers all these upgrades for demo accounts, too. Commission-free bond spreads range between 1.4 and 4.1 points, and Oanda offers 1:5 leverage with negative balance protection.
Beginners receive excellent educational content, including content on capital management and live webinars. There is also no minimum deposit requirement for the Standard account.
Pros & Cons
- Excellent 28-tool MT4 upgrade package and outstanding trading tools
- Trustworthy broker with more than 25 years of experience
- Competitive pricing environment
- Quality market commentary on the OANDA blog MarketPulse
IC Markets
In Summary a top choice for active tradersBond traders benefit from low trading fees, with average bond spreads between 1.0 and 3.4 points in a commission-free pricing environment. It confirms the deep liquidity at IC Markets, which makes it my top choice among the best bond brokers for algorithmic traders. VPS hosting ensures low-latency 24/5 bond trading, and IC Markets offers maximum bond leverage of 1:200 with negative balance protection.
IC Markets offers traders MT4, MT5, and cTrader. It also connects social traders to TradingView with 50M+ peers to share bond trading ideas. The 20-plugin MT4 upgrade elevates MT4 into a cutting-edge bond trading platform.
Pros & Cons
- Leverage of up to 1:500, deep liquidity, and superb trade execution
- Market-leading MT4 upgrade package, MAM/PAMM accounts, and VPS hosting
- Excellent choice of trading platforms consisting of MT4/MT5, and cTrader
- Social trading support via Myfxbook, MetaTrader Signals, and ZuluTrade
- Minimum deposit slightly higher but within a reasonable range
IG Markets
In Summary No withdrawal feeIG Markets provides traders with bond trading in Germany, France, Italy, the UK, the US, and Japan, ensuring the broadest market exposure. Therefore, I rank IG Markets among the best bond brokers for traders seeking diversification. The maximum bond leverage depends on the bond CFD and account classification but exceeds 1:200 with negative balance protection. Bond spreads start from 1.0 points and are commission-free, placing IG Markets among the best-priced bond brokers.
Besides MT4, bond traders get the IG Markets trading platform and ProReal Time for algorithmic and copy trading. IG Markets also offers guaranteed stop-loss orders on bond CFDs.
Pros & Cons
- Broad asset selection for Forex traders
- Quality choice of trading platforms, including MT4
- Autochartist signals integrated with the proprietary web-based platform
- Limited deposit and withdrawal methods
- Higher minimum deposit requirement, but within a reasonable demand
Pepperstone
In Summary Great ECN execution on MT4 platformWhile Pepperstone does not offer bond CFDs, traders get four bond ETF CFDs covering four US bond tranches. It places Pepperstone among the best bond brokers on my listing for traders seeking broader exposure to the US bond market via ETFs. The deep liquidity pools keep spreads tight, but traders must pay a reasonable $0.02 commission per bond ETF per trade.
Capitalise AI for algorithmic trading in a code-free environment in MT4 separates Pepperstone from most bond brokers. VPS hosting ensures 24/5 low-latency bond trading. Traders may also use MT5, cTrader, the proprietary Pepperstone alternative, or connect to TradingView.
Pros & Cons
- Excellent choice of trading platforms consisting of MT4/MT5, and cTrader
- Market-leading MT4/MT5 upgrade package, Autochartist, and API trading
- Social trading support via Myfxbook, MetaTrader Signals, and DupliTrade
- Leverage of up to 1:30 and superb trade execution
- Demo accounts have 30-day time limits
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsI rank AvaTrade among the best bond brokers for beginners. They can start their education with the industry-leading Ava Academy. AvaTrade offers competitive bond CFD leverage of 1:100 with negative balance protection. The commission-free trading environment features fixed bond spreads of 3.0 for the Euro Bund and 6.0 points for the Japanese government bond, with minimum trade sizes of 10 and 100, respectively.
AvaTrade offers bond CFD trading on MT4/MT5 and its proprietary WebTrader and mobile app AvaTradeGO with Trading Central services. Beginners can also benefit from the MT4 Guardian Angel plugin and the fee-based Ava Protect insurance policy.
Pros & Cons
- High quality educational offering via AvaAcademy
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
What Are Bonds and How Do They Work?
Bonds are fixed-income products issued by governments and corporations intended to raise capital. The best bond brokers catering to online traders only offer government bond trading, as corporate bonds carry additional risks.
Higher-quality bonds, like those issued by governments in developed countries, rank among the safest, meaning bondholders are likely to get paid and carry the lowest interest rates. Short-term maturities, the time until bondholders get paid, are less risky and have lower interest rates.
Bond yields move in the opposite direction to bond prices. Therefore, if bond prices increase, yields decrease, and vice versa. Bond prices react sharply to monetary policy, especially government bonds, and traders must follow central bank speeches and decisions closely on top of economic developments.
Trading Fees & Non-trading Fees for Brokers Offering Bonds H2
Bond traders should consider the trading and non-trading fees at the best bond brokers to open an account with the most suitable option for their bond portfolio.
Bond Broker Trading Fees
Oanda | IC Markets | IG Markets | Pepperstone | AvaTrade | |
|---|---|---|---|---|---|
Spreads | 1.4 and 4.1 points | 1.0 and 3.4 points | From 1.0 points | Raw spreads | 3.0 and 6.0 points |
Commissions | Commission- free | Commission- free | Commission- free | $0.02 per bond trade | Commission- free |
Swap Rates | Yes | Text | Text | Text | Yes |
Currency conversions | Yes | Text | Text | Text | Yes |
Bond Broker Non-trading Fees
Oanda | IC Markets | IG Markets | Pepperstone | AvaTrade | |
|---|---|---|---|---|---|
Deposit fees | No | No | No | No | No |
Withdrawal fees | Bank wires only | No | No | No | No |
Inactivity fees | $10 monthly | No | $12 monthly | No | $50 quarterly |
Currency conversions | Yes | Yes | Yes | Yes | Yes |
How to Choose the Right Bond Broker for You
When choosing the best bond brokers, traders should consider the following:
- Bond availability, usually via CFDs or ETF CFDs for traders
- Trading fees
- Liquidity
- Algorithmic trading platforms
- Broker reputation and track record
The Pros and Cons of Using a Bond Broker
Traders must evaluate the pros and cons of the best bond brokers.
The Pros of Using a Bond Broker
- Diversification
- Exposure to interest rate fluctuations
- Hedging potential
- Algorithmic bond trading
The Cons of Using a Bond Broker
- Less volatility for traders to exploit.
- Small price movements that require higher leverage or more capital.
How to Get Started with a Bond Broker
Getting started with the best bond brokers follows the same basics as any asset class.
Here is how bond traders can start trading with the best bond brokers:
- Start with in-depth education to understand bonds and how to trade them.
- Choose a broker offering the bonds you wish to trade.
- Open an account.
- Fund the account with sufficient capital.
- Analyze available bonds and find short-term trading opportunities in leveraged accounts or long-term investments in unleveraged accounts.
- Deploy strict risk management.
Bottom Line
The best bond brokers offer traders diversification opportunities and investors a lower-risk passive income opportunity. While bonds rank as lower-risk assets, often a staple in retirement portfolios, they carry economic exposure and monetary policy risk risks. Bonds also require more capital or higher leverage.
