Compare UK bond brokers and choose a bond brokerage firm to invest in government and corporate bonds. Bond trading platforms can let you buy investment bonds, ETF bonds & public retail or government bonds to earn income on your investments.
|Bond Broker||What bonds can you invest in?||How much does it cost?||CEO Interview||More Info|
|Take advantage of the inverse relationship between long-term interest rates and bond prices with IG government bond futures markets.||Commission is built into the spread for CFDs & spread betting: Long-term Gilt 2, Short-term Gilts 1.4, German Schatz 1, Long-term BTP Italian Government Bond 4|| Open Account |
Your capital is at risk
|Buy and sell hundreds of corporate bonds, gilts and PIBS (Permanent Interest Bearing Shares) in a SIPP, ISA or normal share dealing accounts||Most bonds, gilts and PIBS can only be dealt over the phone. Our phone dealing charge is 1% (£20 minimum, £50 maximum). Some bonds can be dealt online, and will be charged at HL normal share dealing rates||Read Chris Hill CEO Interview||Open Account|
|With Saxo you can invest and trade 5,000+ government and corporate bonds in Europe, US, Asia, Middle East and Latin America digitally.||Saxo bond standard commission rates start at 0.20%, and drop as low as 0.05% as you trade more.||Read Andrew Edwards CEO Interview||Open Account|
|When you invest in bonds and gilts with interactive investor you also get access to IPOs and invest in new companies & bond launches before they are available on the open market.||Interactive Investor charges a flat fee of £9.99 a month which covers you for multiple accounts (following the special offer period the SIPP fee is only £10 a month extra). All service plans give you at least one free trade each month.||Read Richard Wilson CEO Interview||II Reviews|
|IBKR offers low and fully transparent commissions on bonds, with no mark-up on bond prices, and provides access to a full universe of US government securities, 26,427 corporate bonds, 1,003,178 municipal securities and 23,199 CDs||IBKR acts as an agency bond broker and charges from 2.5 to 10 bps on corporate bonds, with a USD 1.00 minimum per order.||Open Account|
How to choose a Bondbroker
What are bonds?
A bond is effectively a securitised loan that is a loan which is broken down into smaller standardised units which are tradeable.
Bonds are known as fixed-income investments because they pay a predictable return over their lifetime. So that investors putting money into bonds today can know in advance what their returns will be over 5,10 or even 30 years. Which is very useful when it comes to long term financial planning. However, the picture has been muddied somewhat by the introduction of negative interest rates which have skewed the returns profile.
Bonds are seen as being less risky than equities and they are popular with investors looking for income rather than capital growth. Bonds can provide both stability and known outcome within a portfolio and are very useful for matching future returns against future liabilities.
On the downside, in a low or negative interest rate environment bond investors may have to take on more risk to achieve their projected returns, as the yields offered by higher quality bonds become negative and investors end up paying to own the bonds rather than receiving an income from them.
Bonds can be issued by governments, corporations and other entities wishing to raise money; they are typically run for a fixed period of time or duration and pay a rate of interest to the bond buyers or lenders that rate of interest is known as the bond’s coupon.
How do bonds work?
Here's a useful example of how bonds can work. For example, if the 5% Treasury Stock 2025 is issued as a bond by the UK government it will be redeemed or repaid in 2025. Within that 5 year term, it will pay a 5% coupon or annual interest rate over that term.
What is a bond broker?
A bond broker is simply a brokerage that specialises in bonds and other fixed-income securities. Because bonds are issued in very large denominations which sometimes run into the billions, bond markets tend to be associated with institutional investors.
Private clients can trade and invest in bond markets though it does require considerable capital to do so directly. Today there is a wide range of bond ETFs which provide investors with exposure to the bond markets from a smaller capital base.
Bonds trade on exchange or OTC or over the counter, electronically or via voice broking and in multiple currencies and jurisdictions. Some bonds trade-in units or 100,000 notional or more whilst others are packaged in retail-friendly sizes of 1000 pounds or dollars notional.
Here is how to invest in bonds
How to buy bonds in the UK
As with most financial services in the UK you will need to open a brokerage or investment account if you want to trade or invest in bonds.
However, it is possible to invest new UK Govt bond issues via the post office or directly from the DMO or debt management office at the Bank of England.
The best way for retail clients to get into bond trading and investing is to open a specialist bond broking account.
Though of course, you may already have an account with a business that offers bond broking. Some of the best brokers that offer bond brokerage to retail clients are;
Our broker reviews explain why each of these brokers could be a good option to help you invest in bonds. Or you can compare broker services in the table above.
It is always worth checking with your existing provider, but if you need to open a new account you will need to go through the broker’s standard account opening procedures. That can usually be achieved online in just a few minutes, and once that's done and the account is funded, you will be ready to go.
Do bear in mind though that there is a difference between investing and trading in bonds. To make sure that you end up with the right account remember that investing implies long-term ownership of assets such as bonds.
Whilst trading is very much about short-term speculation on price movements and is often undertaken using leveraged products that don’t confer ownership of the underlying instruments.
For example, IG offers trading in bonds and bond derivatives but does not offer investments into physical bonds, though they do offer investments into Bond ETFs.
What fees are involved in investing in bonds?
As with trading in stock and shares, there is a commission to pay when you invest or trade in bonds these vary by provider and service. For example, Hargreaves Lansdown charges a £20.00 minimum commission with a £50.00 maximum for bond deals conducted over the phone. Whilst for those bonds that trade electronically their standard stockbroking charges apply.
Saxo Bank offers a tiered commission structure based on a client’s activity and account size bond trading commission rates start at 0.20% with a minimum of €80.00 for classic accounts and fall to just 0.05% with a €50.00 minimum charge for their VIP account holders. Once again, many bonds will need to be traded over the phone with Saxo’s dedicated bond desk.
It is worth considering the fees around bond trading before you begin so you understand how much of a return you will get from your bond, minus any fees.
Who are bond brokers regulated by?
In the UK bond brokers are regulated by the FCA or Financial Conduct Authority though some European firms are currently able to passport into the UK markets and remain regulated by their home market authorities.
An example of this would be Fineco an Italian bank with a presence in London through which they offer Bond broking, but which is regulated in Italy and only lightly overseen by the FCA and PRA here in the UK.
Funds held in a trading account at an FCA regulated bond broker are protected by the Financial Services Compensation Scheme or FSCS up to a maximum of £85,000.
What types of bonds are there?
So what are the best bonds to invest in? Should you choose government or corporate retail bonds? Making this decision depends upon things like; your investing experience, your attitude to risk and your expertise.
Private investors can trade in almost any issued bond. However, some bonds will be off-limits because they are not retail client friendly options. For example, they may only trade in unit sizes of $100,000 or more and cannot be broken down into smaller parcels.
Bonds that are predominately traded overseas may also be difficult to access particularly if your broker does not have access to or membership of the necessary settlement’s infrastructure.
Price discovery can also be an issue for those bonds that are not traded electronically which is still the case for the majority of bond issues. Though many of these barriers are beginning to be broken down as the bond markets become more connected and digitized.
However, there are bonds issued specifically with retail investors in mind. The London Stock Exchange’s Retail Bond Market hosts 156 different bonds spread among 69 issuers, who have raised more £2.50 billion through their issuance.
Ladbrokes, Lloyds Bank, Aviva, and Tesco are just some of the well-known businesses that have raised money through corporate bonds.
There is a dedicated order book for trading in these retail bonds which is known as ORB, through which the bonds can be traded like ordinary stocks and shares, and many of the bonds listed here have denominations from as low as £100.00 and minimum trade size of just £2000.00.
Retail traders can also invest in Government Bonds from home and abroad, and what are known as Investment Grade or IG bonds.
IG bonds (which are not to be confused with the margin trading house that shares those initials) are bonds that are issued by better quality corporate issuers that have a minimum credit rating of BBB.
There are also Junk Bonds which are bonds that have a lower credit rating than the Investment Grade bonds, and which are deemed to have a higher risk of default.
The better the credit rating a bond issuer has, then the lower the chance of the loan not being repaid is thought to be.
One type of bone that is becoming increasingly popular is bond ETFs. These bonds are considered amongst the best by fixed income investors as they allow them to allocate assets to a particular market, a theme, or class of bond very quickly, often with just one trade.
ETFs can also be traded in smaller values and trade sizes, than the bonds that the fund’s track.
In summary, look for a broker who has specialist experience in the bond market who can trade bonds electronically and over the phone and who will therefore offer you the widest range of bonds. That said pick a service that suits your needs and your pockets. If you only have a modest amount of capital to invest you may want to choose a broker that offers access to retail bonds and bond ETFs that are more suited to your circumstances.
Choosing a reputable bond broker is one way to avoid being scammed when buying bonds. Here are some other tips on how to avoid bond scams.
Who offers the best bond ETFs?
ETF DB lists 417 Bond-related ETFs that cover a range of strategies and bond types. Compare the bond returns below to help understand what the best performing bonds to invest in are.
The ETF bonds ranked below are by assets under management or AUM with data accurate as of 28/09/2020.
|Symbol||ETF Name||Total Assets ($MM)||YTD returns|
|AGG||iShares Core U.S. Aggregate Bond ETF||$80,759.08||6.85%|
|BND||Vanguard Total Bond Market ETF||$62,366.55||6.95%|
|LQD||iShares iBoxx $ Investment Grade Corporate Bond ETF||$55,262.66||7.47%|
|VCIT||Vanguard Intermediate-Term Corporate Bond ETF||$38,558.89||6.98%|
|VCSH||Vanguard Short-Term Corporate Bond ETF||$32,512.45||3.89%|
|BNDX||Vanguard Total International Bond ETF||$32,332.47||3.56%|
|BSV||Vanguard Short-Term Bond ETF||$27,218.48||4.35%|
|HYG||iShares iBoxx $ High Yield Corporate Bond ETF||$26,032.36||-1.74%|
|TIP||iShares TIPS Bond ETF||$24,086.62||9.21%|
|MBB||iShares MBS Bond ETF||$22,368.55||3.75%|
Assessing bond returns can help you understand what the best performing bonds to invest in are.
Bond Broker FAQs
Q. Can you invest in bonds through an ISA?
A. Yes, you can invest in bonds through an ISA but to comply with HMRC rules, bonds held within an ISA must be listed on a recognised publicly traded stock exchange.
Q. Are bonds high risk?
A. It depends on which bonds you buy. Government bonds are considered much lower risk than corporate bonds, but they also tend to offer much lower returns. Bonds can go up or down in value and as the investor, you take on the risk of both the value of your investment committed and the interest you could earn.
Q. Can you buy bonds online?
A. Yes, you can. The easiest way is to open a bond brokerage account, research the bonds you want to buy and purchase them by depositing funds in your account. Before you purchase your bonds, make sure that the returns you will get meet your expectations and you understand any fees associated with the transaction.
Q. Is it possible to buy government bonds online?
A. It is possible to buy UK government bonds directly from the Bank of England without using the services of a bond broker. However, the process is not that straight forward as you will need to register and be approved before you can do so