How to Trade Bonds and Interest Rates: The Complete Guide for Traders

Let me tell you a story.

A few years ago I worked at a prop firm. Right next to me sat a group that did nothing but trade bonds and interest rates, and not only in the US. They traded the government bonds of all the top countries, and they nailed it. It felt like they knew something the rest of us didn’t, like they had picked the easiest market to predict.

But in retail trading, you almost never hear anyone say, “I’m trading bonds” or “I’m trading interest rates.” Most people don’t know what that even means, and fewer still know how to start. This guide will help you understand it: what bonds and interest rates are, what moves them, and how to actually start trading these markets.

Where to Trade Bonds and Rates

Short on time? These are the brokers we would look at first, split by how you want to trade. The full breakdown is in the how to trade section.

Via futures brokers

Via CFD brokers

In This Guide

• What Are Bonds?
• What Are Interest Rates?
• What You Can Trade
• What Moves Bonds and Interest Rates
• Why It Is So Interesting
• How to Trade Them
• Final Word
• FAQ

What Are Bonds?

A bond is a loan. When a government needs money, it borrows it by selling bonds. The people who buy them are the lenders: they collect interest along the way and get the face value back when the bond matures. A US Treasury note is simply the US government’s written promise to pay you back, with interest.

To trade bonds, there is one idea you need: when interest rates go up, bond prices go down, and when interest rates go down, bond prices go up.

Say interest rates rise.
New bonds now pay more.
So older bonds that pay less become less attractive, and their price falls.

Now the other way round.
Say interest rates fall.
New bonds now pay less.
So older bonds with the higher payout become more valuable, and their price rises.

If interest rates rise

Interest rates▲ Up

Bond price▼ Down

Bond yield▲ Up

Trader’s viewSell bonds

If interest rates fall

Interest rates▼ Down

Bond price▲ Up

Bond yield▼ Down

Trader’s viewBuy bonds

You will also hear the word yield. It is the return a buyer gets for the price they pay. Say a bond pays $4 a year and costs $100: that is a 4% yield. If the price falls to $80, the same $4 is now a 5% return. So when the price falls the yield rises, and when the price rises the yield falls.

The bond everyone watches is the 10-year US Treasury note. Its yield is a benchmark for borrowing costs across the economy, from mortgages to company loans. Other countries have their own versions, such as Germany’s Bunds, UK Gilts and Japanese government bonds, and global bond yields often move together.

The most direct way to trade this market is through futures. The most popular contract is the 10-Year US Treasury Note future (ticker ZN) from CME Group, based on $100,000 of face value. CME describes it as its most actively traded Treasury product.

Bond futures are quoted in points and 32nds of a point, so a quote of 110′16 means 110 and 16/32, or 110.50.

Another example: the Canada 10-year bond

That example used a US contract, but the same idea works for bonds from other countries. You should also remember that trading bonds is different from investing in them. An investor buys a bond to collect the interest and holds it until it matures. A trader doesn’t care about the interest. They trade the price, buying when they expect it to rise and selling short when they expect it to fall.

A good second example is the Canadian 10-year government bond, which CMC Markets offers as a CFD. It shows how a trader can reach a non-US bond without a futures account. CMC lists it by contract month, so check which month is current on the platform.

The idea is the same as in the examples above. A trader who expects the Bank of Canada to cut rates, and yields to fall, would buy the CFD, because the bond price should rise. A trader who expects yields to keep rising would sell it. The CFD follows the bond price rather than the yield, so when you read news about Canadian yields, remember that the price moves the other way.

What Are Interest Rates?

Interest rates are the price of borrowing money. The rate that matters most is the one set by the central bank. In the US, the Federal Reserve sets a target for the federal funds rate, which is what banks charge each other for overnight loans. Almost every other rate in the economy, from mortgages to the yield on a 10-year bond, is influenced by it.

When the Fed raises rates, borrowing gets more expensive and the economy cools. When it cuts, borrowing gets cheaper and the economy warms up. Because this affects stocks, currencies and bonds at the same time, central bank decisions are among the biggest events in the market.

Trading interest rates means trading what the market expects the central bank to do next. You do it with short-term interest rate futures. The two main CME products are SOFR futures, based on the overnight rate that replaced LIBOR for US dollar lending, and Fed Funds futures, which track the Fed’s policy rate. CME also publishes a free FedWatch tool that turns Fed Funds futures prices into the odds of a rate change.

The difference between the two markets is the time horizon. Short-term rate futures show where traders think the central bank will take rates in the coming months. Bond futures like the 10-year note reflect expectations over a decade. Both react to the same news.

What Bonds and Interest Rates Can You Trade?

There are two families of markets. Bond futures track the price of government bonds, and short-term interest rate futures track where central bank rates are heading. Inside each family you choose a country and a time horizon, so the list is longer than most traders expect.

Government bond futures

Each contract follows bonds of a different maturity. The shorter the maturity, the more closely it follows the central bank’s next moves. The longer the maturity, the more it reflects the outlook for growth and inflation.

Sources: CME Group, Eurex and ICE contract specifications. Maturity ranges are for the deliverable bonds and can be revised by the exchanges.

The US 10-year note and the German Bund are the two benchmarks most traders start with. One more detail: a US 10-year note contract is $100,000 of face value, the 2-year is $200,000, and a Bund or Gilt contract is €100,000 or £100,000, so check the contract size before you size a trade.

Other country markets

Beyond the US, Germany and the UK, these markets are open to traders whose brokers offer them:

• Japan. The Osaka Exchange lists 5-year and 10-year Japanese government bond (JGB) futures, plus mini contracts.
• Southern Europe. Eurex lists Euro-OAT, Euro-BTP and Euro-BONO futures, aimed at the French, Italian and Spanish bond markets.
• Canada and Australia. The Montreal Exchange lists Ten-Year Government of Canada Bond futures, and the ASX lists Treasury Bond futures.

Short-term interest rate futures

These contracts are priced from the expected interest rate, usually as 100 minus the rate, so they work like the SOFR example above.

• SOFR futures (CME). Based on the overnight rate that replaced LIBOR for US dollar lending. The 3-month contract (SR3) is worth $25 per basis point, and the 1-month contract (SR1) is worth $41.67.
• Fed Funds futures (CME). Track the Federal Reserve’s policy rate directly. They are the contracts behind the FedWatch tool.
• €STR futures (CME). Based on the euro short-term rate, which closely follows the ECB’s deposit facility rate.
• Euribor and SONIA contracts. The euro and UK equivalents. Capital.com offers CFDs on both, alongside SOFR and Fed Funds.
• T-bill futures (CME). Cash-settled contracts based on 13-week US Treasury bill auction yields.

Smaller and different ways to trade the same markets

You do not have to trade a standard contract in the standard way. These variations are worth knowing about, especially if you have a smaller account.

• Micro Treasury futures. CME’s Micro Ultra 10-Year Note and Micro Ultra T-Bond contracts have a $10,000 face value, a tenth of the standard size, so each trade carries far less risk.
• Micro Treasury Yield futures. These trade the yield itself instead of the bond price, on the 10-year and 30-year. Each basis point is worth a fixed $10, and you buy if you expect yields to rise, which is the opposite of buying a bond future.
• Options on Treasury futures. CME lists options on its Treasury futures, with three expiries a week on the 10-year (Monday, Wednesday and Friday), and options on SOFR futures too.
• Yield curve spreads. Instead of betting on direction, you trade the gap between two maturities, such as the 2-year and the 10-year (the “2s10s”). CME offers lower margin on some of these spread trades.
• Bond ETFs. Funds that track Treasuries trade like shares and need no contract rolling, so a stock broker is enough. They follow bond prices but carry fund fees, and this guide focuses on futures and CFDs because they give you more control.
• Credit and mortgage futures. For more advanced traders, CME also lists credit index futures and 30-year UMBS mortgage (TBA) futures.

What Moves Bonds and Interest Rates

Bonds and rates react to a short list of drivers, and most of them are scheduled, so you can put them in a calendar.

• Central bank decisions and guidance. The decision matters, but what central bankers say about the next move often matters more. Fed meetings, press conferences and speeches move short-term rate futures first.
• Inflation data. Hotter inflation than expected, such as in the CPI report, means rates may stay higher for longer. That pushes yields up and bond prices down. Cooler inflation does the opposite.
• Jobs and growth data. Strong jobs numbers and GDP growth give central banks room to keep rates high, which lifts yields. Weak data raises bets on rate cuts and lifts bond prices, which is why bad economic news can be good news for bonds.
• Government borrowing and auctions. Governments sell new bonds at regular auctions. Heavy supply or weak demand at an auction can push prices down.
• Safe-haven demand. When markets panic, investors move money into government bonds for safety. That lifts prices and pushes yields down, even if rates haven’t changed.
• Other central banks. The ECB, the Bank of England and the Bank of Japan matter too. Bond markets are linked, so a move in German Bund yields can spill into US Treasuries.

Before you place a trade, check when the next Fed meeting, CPI report and jobs report are due. These are the moments when bond and rate futures tend to move the most.

What Makes Bonds and Interest Rates Trading So Interesting?

For me, it comes down to this: a bond or interest rate price is the macro story of a whole country in a single number. Growth, inflation, jobs, government borrowing and central bank policy all end up in the same price. Trade US Treasuries and you are following the US economy. Trade Bunds and you are following Europe. Trade gilts and you are following the UK. You end up learning how each economy works, and how they push and pull on each other.

The other thing I like is that you can see what the market expects. Traders follow the odds of the next rate move, and two free CME tools make that easy. In the US, the CME FedWatch tool turns 30-Day Fed Funds futures prices into the probability of a rate change at each Fed meeting. In Europe, CME’s €STRWatch does a similar job for the ECB, showing where €STR futures could settle under different rate decisions.

When those odds shift, bond and rate prices usually shift with them. Looking at both before a central bank meeting or a big data release is a good way to see how much is already priced in.

How Can You Actually Trade Bonds and Interest Rates?

There are two practical routes: futures and CFDs. Futures are clearly the best way, and CFDs are the alternative if you want something smaller and simpler.

Futures: the best way

With futures you trade the same exchange-listed contract the professionals use, with one transparent price, deep liquidity and trading nearly 24 hours a day, Sunday to Friday.

Getting started with trading futures takes three things: an account with a futures broker, permission to trade futures (most brokers ask about your experience and risk tolerance first), and margin, which is the deposit the broker holds while your position is open. Margin is set by CME and your broker, and it can change, so check the current figure for the contract before you trade.

Every contract has a fixed size. The 10-year note (ZN) is $100,000 of face value, so a one-point move is worth $1,000 per contract. That is a lot for a small account, which is why CME also lists Micro Treasury futures with a $10,000 face value, covered above. Check which ones your broker offers.

Futures also expire. Treasury futures expire in March, June, September and December, and most traders roll into the next contract shortly before expiry, when volume moves across. Many brokers close or restrict positions before the delivery period starts, so look up the dates with your broker before you hold through them.

Which broker? The three below cover most traders, and each has a full review:

• Interactive Brokers is our top pick. It gives access to futures on exchanges around the world, which matters if you want Bunds or Gilts as well as Treasuries, and it accepts US clients. Read the Interactive Brokers review.
• Saxo Bank is a premium multi-asset platform where futures sit next to stocks, ETFs and CFDs, so you can keep everything in one account. Read the Saxo Bank review.
• Moomoo has no minimum deposit and offers most US futures contracts, including US Treasury futures, as well as options. Futures availability depends on your country and account, so check what is open to you. Read the Moomoo review.

Professional traders also use Exante, which has a higher minimum.

CFDs: the smaller alternative

If a futures contract is too big, or you don’t want to deal with expiry and margin, CFD trading is the alternative. A CFD lets you trade the price move of a bond or rate future without owning the contract, usually in a smaller size.

You choose a market such as the US 10-year note, the German Bund or a SOFR rate future, set your own position size, and the broker sets the margin. The trade-off is that you trade against the broker’s price rather than the exchange’s, so it can differ slightly from the futures price, and spreads and overnight financing apply. Some rate CFDs follow a specific contract month and expire, so check the details of each market.

We cover two CFD brokers in this guide:

• Capital.com is our pick for rate CFDs. It lists CFDs on SOFR, Fed Funds, Euribor and SONIA futures, so you can trade US, Eurozone and UK rate expectations in a small size, with a $20 minimum deposit. Read the Capital.com review.
• CMC Markets is the one to look at for government bonds. It offers Gilt, Bund and Treasury note CFDs, in a range it describes as 35+ government bond and interest-rate instruments, but it is not available to US residents. Read the CMC Markets review.

CFDs carry a high risk and most retail CFD accounts lose money, so check the live spread and margin on the platform before you trade. Availability also depends on your country.

In short: choose futures if you want the deepest market and exchange pricing and you’re comfortable with larger contracts. Choose CFDs if you want smaller positions and a simpler setup. Either way, start on a demo account and practise through a Fed meeting or a CPI release before you risk real money.

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Frequently Asked Questions

This guide is for informational purposes only and does not constitute financial advice. Examples use round numbers for illustration and are not live prices. Contract details are from CME Group and are accurate as of October 2026, but contract specifications, margins and broker products can change, so always check current details with CME and your broker. The Moomoo link is an affiliate link, and we may earn a commission if you open an account. The other brokers mentioned are not affiliate relationships. Futures and CFDs carry a high risk of losing money rapidly due to leverage.