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CFDs are leveraged products and can result in the loss of your capital. Rankings are influenced by affiliate commissions. All information collected on 1/11/2017.

The Ultimate Guide to

Choosing a Broker
For Treasuries

Not sure which broker is right for you?

Don’t worry - we’ve got you covered. In this guide, you’ll learn:

Ready?

Part 1

Why Choose
For Treasuries?

scored best in our review of the top brokers for treasuries, which takes into account 120+ factors across eight categories. Here are some areas where scored highly in:

  • + years in business
  • Offers + instruments
  • A range of platform inc.
  • 24/7 customer service
  • Tight spreads from pips
  • Used by 0+ traders
  • Offers demo account
  • 0 languages
  • Leverage up to

offers one way to trade: . If you wanted to trade TREASURIES through copy trading or other means, skip to part two.

The two most important categories in our rating system are the cost of trading and the broker’s trust score. To calculate a broker’s trust score, we take into account a range of factors, including their regulation history, years in business, liquidity provider etc.

have a trust score, which is . This is largely down to them being regulated by , segregating client funds, being established for over years, and much more. For comparison:

Trust Score comparsion

Trust Score
Year Established
Regulated by
Uses tier 1 banks
Company Type Private Private Private
Segregates client funds

The second thing we look for is the competitiveness of the spreads, and what fees they charge. We've compared these in detail in part three of this guide.

Part 2

Who is (& Isn’t)
Suitable For

As mentioned, allows you to trade in one way: .

Suitable for:

  • Spread Betting
  • CFD Trading
  • Forex Trading
  • Social Trading

Not Suitable for:

To trade with , you'll need a minimum deposit of $. offers a range of different account types for different traders including a , .

Finally, isn't available in the following countries: . They do not offer islamic accounts either.

Part 3

A Comparison of vs. vs.


Want to see how stacks up against and ? We've compared their spreads, features, and key information below.



Spread & fee comparsion

The spreads below are illustrative. For more accurate pricing information, click on the names of the brokers at the top of the table to open their websites in a new tab.
Fixed Spreads
Variable Spreads
EUR/USD Spread
GBP/USD Spread
DAX Spread
FTSE 100 Spread
S&P500 Spread

Comparison of account & trading features

Spread type Fixed
EUR/USD Spread
EUR/GBP Spread
Crude Oil Spread
Gold Spread Private Private Private
DAX Spread

Part 4

Popular Traded Instruments: Treasuries – Government Issued Bonds

Treasury securities are debt obligations issued by central/federal governments to raise funds for financing fiscal deficits and public projects, as well as for funding their own operations. When a treasury security is purchased, essentially the owner is providing a loan directly to the government. In return, the government pays periodic interest and repays the principal amount on the maturity date. Treasury securities are considered to be one of the safest among all debt instruments as the government is generally expected to be able to meet its obligations.

Types of Treasury Securities

Treasury securities are available in multiple varieties based on maturity periods, coupons and other features. In the UK, these securities are known as gilts and they are of following types:

  • Conventional Gilts: These are the simplest debt instruments issued by the UK government and they also contribute the largest share in total government borrowings. These bonds pay a fixed coupon amount semi-annually and the final coupon with the principal is paid at the end of the maturity period. Generally, the nominal value of these bonds is quoted at £100‎.

  • Index linked gilts: These gilts also offer semi-annual coupon payments, however the coupon payments and principal repayment are adjusted in accordance with the RPI (Retail Price Index), which is a proxy for inflation in the economy. The principal and coupon payments are adjusted to accommodate for the accrued inflation since the issuance of gilt. These gilts provide decent coverage against inflation as higher inflation leads to increased coupon payments. Index linked gilts issued post-September 2005 are linked to inflation figures published 3 months ago.

  • Double Dated Gilts (Rump Gilts): These gilts have a band of maturity dates and the government can choose to redeem them in full or in part on any of the dates in the band. These gilts are relatively older, small in quantity and not very liquid.

  • Gilt Strips: This is an arrangement in which the coupon payments and the principal repayment are stripped off the original gilt and traded separately in the market as zero coupon bonds. For example, a 5-year semi annual gilt can be stripped into 11 zero coupon bonds, 10 for semi annual coupons and 1 for principal repayment. These gilt strips are individually traded in the market.

Benefits of Investing in Treasury Securities

  • Principal Preservation: Backed by the credit worthiness and full faith of the central government, treasury securities are extremely secure debt instruments. In sound economies, the chance of the central government defaulting on its payment obligation is quite rare. Although the risk of default is low for these securities, they do carry market risks.

  • Reliable income stream: Timely interest payments on coupon bearing treasury bonds ensure a reliable fixed income source.

  • Tax Benefits: Often the interest generated on treasury securities is exempted from local and central taxes which gives them an edge over the yields of taxable securities. This feature makes treasury securities very desirable in countries/states with high tax regimes.

  • Wide maturity range: These securities are available in wide range of maturities from few days to 30 years.

  • Liquidity: Treasury bonds are highly liquid in nature and can be easily bought and sold in the secondary market prior to maturity.

How Can Treasury Securities Be Purchased?

Treasury markets are one of the most dynamic capital markets in the world with multiple traders buying and selling securities worth billions on a daily basis. Treasuries are available for purchase in primary as well as secondary markets. The primary markets are where treasuries are issued for the first time through an auction process, organised mostly by the country’s central bank at regular intervals. Primary dealers (leading banks and brokerages) participate in this bidding process. Those wishing to purchase treasuries can direct their bids in the primary market through one of these primary dealers.

After these treasuries have been issued in primary markets, they can be bought and sold on the secondary markets through trading platforms provided by brokerage houses at the current market price.

Ways to Trade Treasury Bonds

  • Laddered portfolio strategy: In a laddered portfolio strategy, securities are purchased with maturities varying from short, medium to large, rather than purchasing treasuries with the same maturity. Such a strategy improves average the yield of the portfolio and provides periodic liquidity.

  • Government bond funds: These bond mutual funds run by professional managers who typically buy government treasuries issued from domestic as well as foreign governments. These are low-risk funds which are suitable for risk averse investors who want steady income and stability.

  • Speculative trading around treasuries through CFDs: Multiple brokers provide platforms for CFD trading on government securities. CFDs in treasuries allow traders to speculate on the price movement of popular treasury bonds. With CFDs, traders can magnify their exposure to relatively small price movements because of the margins at play. Popular regulated brokers such as Avatrade, City Index, IG and others provide platforms for CFD trading on well-known treasuries issued by governments across the world.

Risks Associated with Treasury Investments

  • Interest rate risks: The market price of treasuries is inversely correlated with prevalent interest rates and they can go down if interest rates tend to increase.

  • Re-investment risk: This risk is associated with the possibility of the regular cash flows obtained from treasuries being at lower interest rates than the original treasury itself. This risk is more evident during periods of falling interest rates.

  • Credit Risk: This is the risk of the government defaulting on its commitment to pay back. Generally the quantum of this risk is very low for sound economies.

Conclusion

Treasuries are essentially bonds issued by the central/federal government to finance deficits and spending. They are low-risk debt instruments, which are highly liquid and available in a range of maturities. They provide a safe haven for traders with a low-risk appetite and the need for a stable and regular income source. These bonds also play a critical role in portfolio design by balancing out the risk of investing in equities.


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