Bonds: Provide money, receive interest
With bonds you can generate regular interest payments and when the bond matures get your money back. We explain why.
Three reasons for bonds
- You lend money to corporations or entire countries – and earn interest in return.
- You have the right to repayment or can flexibly sell the bond before it matures.
- Börse Stuttgart as the market leader in exchange-based bond trading offers you best terms.
Tops & Flops
Give and take
Alongside equities, bonds are the second largest known class of securities, although the two instruments have little in common. When you buy a bond, you grant a company or government a loan, as it were. In return, you receive either fixed or variable interest and when the bond matures the nominal value back. Bond issuers can be governments, state institutions or corporations. And don’t be surprised: The current price of a bond on the exchange is stated as a percent of the nominal value not in Euros.
Prior to purchasing a bond, you need to decide what terms the security should have. The following features bear considering:
- The coupon determines the scale of interest. Payment is as a rule once a year and can be either fixed or vary over time.
- The nominal value is the fixed size of the receivable that has to be repaid to you on maturity of the bond.
- When a bond matures and you get your money back depends on the maturity period. Depending on the duration, a distinction is made between short and long bonds. But you need not worry, as you can sell the bonds at any time through Börse Stuttgart.
- The smallest tradable unit of a bond is, as a rule, EUR 1,000. The minimum lot can, however, also be EUR 10,000 or EUR 100,000 for example.
Trade like the pros
The rule in the capital market is: The higher the risk, the greater the possible profit. As regards bonds this means, the weaker the credit rating of the issuers, the greater the possible yield. You should focus not only on the scale of interest offered but also consider how probable it is that you will not only get the interest but your money back when the bond matures.
Bonds may not be as liquid as other securities but our trading experts make it possible for you to trade bonds at a fair market price in the desired volume. First, they bundle the incoming orders from investors. Second, they are superbly networked in the financial market and can draw on liquidity from professional trading. And third, they themselves inject additional liquidity. In this context, they establish short and limited-scale positions of their own if for a client order no suitable counterpart can be found. In short: At Börse Stuttgart you can buy and sell bonds at terms that are otherwise only valid for the professional investors.
This is precisely why Börse Stuttgart is today the market leader in exchange trading and the largest bond trading hub in Germany. As an investor you can choose from a large number of government bonds, corporate bonds and other bonds. You can trade the interest-bearing securities not only in minimum lots or in multiples thereof, but also adapt your order volume in small steps.