Fundamentals for Fixed Income Investments – Trading Strategies

Do you want to know more about what is fixed income assets and how to trade them? Read this article about fundamentals for fixed income investments  to find out how to profitably trade fixed income assets.

Fundamentals for Fixed income investments | Fixed Income Strategies

Fixed income investments, often referred to as money market securities and more often than that bonds, can come in a variety of forms. However, most traders will be focusing on governmental securities, such as US Treasuries. With this, we need look at the fundamentals of what moves the fixed income markets, and without a doubt the biggest thing is going to be simple demand.

Bonds move inversely to what most traders are used to. They rise in price, and in turn will lose part of the interest paid to holders of those bonds. This is because demand is higher. As interest rates rise, you make more money at the end of the curve, or when the bond matures. However, most people trading bonds are worried about the actual value of the bond itself, meaning that when it rises in price, they can sell their bonds back into the marketplace and make their profits than.

Interest-rate expectations of course are highly influential when it comes to bonds, so for example US Treasuries are highly sensitive to jobs numbers, interest-rate hikes, and statements coming out of the Federal Reserve. If they are likely to raise interest rates, that means that typically bonds aren’t as strong, because they need to entice more buyers into the market. On the other hand, we can see a complete reversal of that if there is strong demand for US Treasuries at this point in time. Interest rates go down, because quite frankly the US government doesn’t have to entice traders quite as strongly. Without a doubt though, interest-rate expectations are by far the leading indicator of what will happen in these instruments.