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I am trading in others fields than bonds and I am as such totally at beginner level in this field. I never traded some so far and miss the practical aspect very much. I read a lot on them, but there are a few questions I haven't find an answer so far.
- do bonds i.e. interest rates fluctuate like stocks?
- if bonds "only" fluctuate when e.g. central banks are releasing the new interest rates, or when moddy's & co are noting a company, wouldn't that make bond trading somehow borrying? i.e. with only a few monitoring & trades at these times of the year?
- does it make sense to buy a bond before the coupon payment and to sell it again just after to cash in the coupon?
- for a given bond (may be you ask which one as there are different classes - let's take a T-bill or a muni or anything you want), how can you see the date of the next coupon payment?
There are markets for bonds just like for stocks. Called cash markets, don't confuse with with bond futures and their markets. Prices are influenced by demand and supply, stupid remarks from central bankers and so on.
Companies may sell bonds too, called corporate bonds, but these are very different from the Notes/Bonds sold by governments.
Nice idea, that's how we all make money...NOT. When you buy a bond you will have to pay the seller the amount of interest due up to the purchase date. Though you will get the complete amount of interest when the coupon is due, you effectively get only the amount from the date of your purchase to the coupon date.
May be to be more concrete (as you write to trade with interactive brokesr), how can you see those cash markets for bonds in interactive borkers' tool?
I did monitor one t-bill to see a little how it reacts over the time. But nothing really happened, the price remained the same. Does that mean that for a regular income, you would choose a t-bil e.g. and for a more dynamic bond to trade like stocks, you would use one bond in the cash market?
Where can you find this information? Can you do that in the tool of interactive b.?
ok, so practically how would you trade bonds? is it so immediate like stocks and it moove each day or do you wait 1x a month for the interest rates to change and you take a bet on these changes and the rest of the time, you have "nothing" to do?
Why do you want to trade bonds? Usually you invest in bonds to earn the interest. Not much these days. And I'd be reluctant to invest now, rates will go up. But nobody knows when.
To really trade bonds you need access to a bond market. Eurex bond market has a minimum order size of 1 mio €. One bond will cost you about 145k € for a notional value of 100k €. German 10-Yr are available in sizes down to 100 €. But these sizes are suitable for investing only. I do not know the minimum size for the markets offered by IB for US treasuries, please lookup at their website.
Poor men's alternative to trading bonds is trading bond futures. But since you label yourself as beginner I strictly advice against it.
If you want to ignore my advice start with Schatz (Future on 2-Yr Notes). Overnight margin is 500 € with IB, one tick is worth 5 € and it moves slowly. Just be careful.
And be careful, If interest rates go up, your bond will loss money, maybe you have studied a little bit since your first inquire and now you now about the accrued interest and the price/yield relationship. (as interest rates and Investors capital flowing can move a lot bond markets, there are times where bonds can generate returns similar to those expected in stocks, but keep in mind commissions, fees fees banks....)
