A bond trader buys and sells bond commodities on behalf of a client or for personal investment. The majority of bond traders work for bond brokerage firms and are seasoned financial experts. In most places, however, anyone can participate in the bond market. Different traders have different training and approaches, but on the most basic level, they all do the same thing. Bonds are analyzed, risks are assessed, and purchases and sales are made.
The buying and selling of bond assets is the most visible task of any bond trader. Trading is a broad term for this process, and it is the lifeblood of any bond market. On the open market, major entities — usually national and local governments, but occasionally large corporations — sell bond interests to any willing buyer. Traders are the people who take advantage of these opportunities.
Bond networks handle the vast majority of trades. By contacting the bond distributor and arranging for a direct purchase, traders can buy and sell interests in real time. Purchasing a bond interest is usually simple, as long as the buyer knows what he or she is looking for. Filling out the necessary paperwork and tendering the required funds is usually all that is required to purchase a treasury bond.
Anyone who buys even a single bond is referred to as a “bond trader” informally. However, a large part of a professional bond trader’s job is advising clients on where to invest. It’s usually a lot more difficult to guide clients through the process of structuring bond investments than it is to simply execute a transaction.
Bonds are typically sold as long-term loans with pre-determined interest payments. Interest rates are usually the focus of trading. When a client buys a bond, he keeps it until it matures or until he decides to sell it. The most important factor in deciding whether to buy or sell a bond is whether it is likely to yield a return on investment.
The job of a bond trader often includes a lot of research and analysis. Traders must usually be acutely aware of market movements and keep a close eye on major changes in interest rates and payout structures. To predict bond performance over time, most traders use sophisticated algorithms and statistical studies, which can help clients understand the relative risks and potential rewards of various bond investment strategies.
Clients are frequently advised to buy bonds in bundles, which are referred to as portfolios, by financial advisers. An investor’s portfolio will typically consist of a mix of high-interest and low-interest, long-term and short-term bond interests. A financial trader will assist clients in determining the best mix based on a variety of factors.
Re-sales are another aspect of bond trader jobs. Clients who are concerned that their bond investments are losing money may look to resell those interests on the secondary market. This market is typically managed by traders and professional brokers, who assist bond holders in making advantageous sales and exchanges.