LearnBonds UK

How To Buy UK Bonds – The Best Bonds for 2021

Based in the UK and looking to invest in bonds? With thousands of bond instruments to choose from, we have nailed our list of the best 5 UK bonds down to just five. Find out how to make an investment today.
Author: Kane Pepi

Last Updated: September 7, 2021
Fixed Rate Bonds UK | Learnbonds
Fixed Rate Bonds UK | Learnbonds

If you’re based in the UK and looking to invest some money into the financial markets, bonds are well worth considering. Your investment will be passive, meaning that you are not required to actively manage your money.

Instead, you’ll receive a fixed number of interest payments until the bonds mature. When they do, you’ll receive your initial investment back.

In this article, we list the best UK bonds to invest in 2021. We also show you which brokers to buy your chosen bonds from.

Note: If you’re a complete newbie in the world of bond investments, we would suggest opting for a bond ETF fund. In doing so, the respective fund will actively buy and sell bonds on your behalf. This is ideal as you are not required to have any knowledge in choosing investments yourself.

Table of Contents

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    How to Buy UK Bonds in 3 Quick Steps

    Don’t have time to read our guide in full? Below you’ll see three quick steps that you need to follow to buy UK bonds right now.

    Step 1: Find an FCA-regulated broker

    eToro to buy vodafone shares

    You'll want to choose a broker that gives you access to bond ETFs - as these are suited to retail investors.

    Step 2: Deposit money into your broker account

    Deposit funds in a matter of seconds. Choose from a debit/credit card, e-wallet, or bank wire.

    Step 3: Buy UK bond ETFs

    Browse the many UK bond ETFs hosted by the broker, decide how much you want to invest, and place your trade.

    Top 10 Best UK Bonds to Buy Right Now

    1. Vanguard Total Market Bond ETF – Our Top Pick for the Best UK Bond ETF Right Now
    2. Euro-Bund ETF on AVATrade – Best Bond to Gain Exposure to German sovereign bonds
    3. US TBond 30Y on Markets.com – 22% Annual Returns over the last 12 months
    4. Euro BTP Future Bonds on IG – Best Bond that Tracks Italian Bond Yields.
    5. Patryk Peltonen Bond Portfolio on eToro – Best Bond Portfolio of Expert eToro Trader with 10.2% Returns. 
    6. SPDR Bloomberg Barclays High Yield Bond ETF – Top-rated UK Bond ETF for High-Yield Gains
    7. iShares Corp Bond UCITS ETF – Best UK Bond ETF to Gain Exposure to Corporate Bonds
    8. PIMCO Active Bond Exchange-Traded Fund – Best UK Bond ETF for International Diversification
    9. Japan Govt Bond on AvaTrade – Best way to Gain Exposure to the Singapore Exchange.
    10. Vanguard Intermediate-Term Corporate Bond ETF (VCIT) on eToro – 3.02% Average Annual Return

    67% of retail investor accounts lose money when trading CFDs with this provider.

    10 Best Bonds to Buy or Trade

    Looking for the best bonds currently offered in the UK market? Although there are thousands of bond instruments to choose from, we’ve narrowed our list down to just five. Be sure to read through our brief explainers on why each bond makes the cut.

    Note: The below annual returns are based on the value of the bond investment 12 months prior to writing this article, in relation to today’s prices. As such, there is no guarantee that the performance of the highlighted bonds will continue to move in the same direction. On the contrary, you could lose money.

    1. Vanguard Total Market Bond ETF on eToro - 3.3% Annual Return

    If you've got virtually no idea of what bonds you should invest in, we would suggest considering the merits of the Vanguard Total Market Bond ETF. Firstly, the bond is managed by leading fund provider Vanguard, which has more than $5 trillion worth of assets under management. As such, Vanguard will buy and sell thousands of bonds on your behalf, so the entire investment process is passive.

    In terms of its portfolio, the Total Market Fund will invest in a fully diversified range of bonds. In the government sector, this includes everything from U.S.Treasuries and foreign sovereign bonds. The fund will also invest in blue-chip corporate bonds, as well as mortgage-backed securities. Moreover, Vanguard will even hold a small percentage of municipal bonds. This means that its bond basket contains instruments of all risk levels.

    Crucially, Vanguard will rarely hold on to its bonds until maturity, as it will attempt to offload them for a profit on the secondary market. You will, of course, also benefit from ongoing coupon payments. If you like the sound of the Vanguard Total Market Bond ETF, we would suggest making an investment through eToro. The broker is regulated by the UK's FCA, CySEC (Cyprus), and ASIC (Australia), and you can deposit funds with a debit/credit card, e-wallet, or local bank transfer.

    Our Rating

    • Copy successful investors
    • 0% commission on bond ETFs and stocks
    • Minimum investment £200
    • Minimum withdrawal of £50
    • Limited number of assets compared to IG
    • MT4/5 not available
    67% of retail investor accounts lose money when trading CFDs with this provider.

    2. Euro-Bund ETF on AVATrade - 9% Annual Return

    If you're looking to gain exposure to a foreign sovereign bond, it might be worth considering the Euro-Bund ETF offered at AVATrade. In a nutshell, Euro-Bunds are securities issued by the government of Germany. In the vast majority of cases, the bonds have a 30-year maturity. However, as you will be investing in an ETF, the bonds never expire. Instead, you are speculating on the future direction of the bond.

    Over the past 12 months, the value of Euro-Bunds have increased by 9%, which is a huge return. However, if you feel that the bonds are heavily overvalued, AVATrade also gives you the option of going short. This means that you will be speculating on the value of the bond going down. Further, AVATrade also allows you to trade Euro-Bunds at leverage of 5:1. As such, a £500 balance would allow you to invest £2,500.

    In terms of the broker, AVATrade is hugely popular with newbie traders. You will be able to deposit funds instantly with a debit or credit, and a bank transfer if you require higher limits. Opening an account takes just minutes, and minimum deposits start at £100. Most importantly, AVATrade is heavily regulated. This includes licenses in Ireland, South Africa, Japan, and Canada - so you've got regulatory protection on multiple fronts.

    Our Rating

    • Very competitive spreads
    • MT4/5 supported
    • Multiple regulatory licenses
    • Does not offer 2FA login
    • Bond department could be more comprehensive

    3. US TBond 30Y on Markets.com - 22% Annual Returns

    Who would have thought that US Treasury Bonds could be so volatile, with the USTBond 30Y instrument on Markets.com increasing in value by over 22% over the past 12 months? Much of this is down to the effects of the global Coronavirus pandemic, with investors seeking a safe haven.

    The way this particular bond type works is you are speculating on whether the yields on the bond will go up or down on the secondary market. If you think the value of the bonds will go down, you need to place a 'sell' order. Alternatively, if you think they will continue to rise, opt for a 'buy' order.

    If you do want to speculate on US Treasuries, Markets.com allows you get to get started with an investment at just £100. The FCA-regulated broker also offers leverage, so you'll be able to trade with more money than you have in your account. We also like Markets.com for its extensive payments department. This includes deposits and withdrawals in the form of e-wallets, debit/credit cards, or a bank transfer.

    Our rating

    • Globally recognized broker
    • Thousands of financial instruments
    • Low fees
    • More suited for advanced traders
    • Limited educational resources

    4. Euro BTP Future Bonds on IG - 12.5% Annual Return

    The Euro BTP Futures market is an instrument that tracks Italian bond yields. The basket typically focuses on long-term bonds with a maturity of between 7-11 years. With that said, if you decide to use a regulated broker like IG, you will be speculating on whether you think the value of Italian bonds will go up or down.

    At the time of writing, more than 76% of the market is short on the bonds. In Layman's terms, this means that investors think that the value of the bonds will decline in the short-run. If you think that the markets are correct, IG allows you to place a short-sell order.

    Moreover, if you've got a higher tolerance for risk, IG also allows you to apply leverage to your bond trades. What we also like about IG is that it is super-competitive on fees. Not only does it offer tight spreads, but you will not be required to pay any commissions. In terms of the broker's regulatory standing, IG is licensed in multiple countries. On top of the UK, it also holds licenses with BaFin in Germany.

    • Regulated by the FCA
    • Fast account activation for UK traders
    • Commission-free broker
    • 1% deposit fee when using Visa
    • MT5 not support

    5. Patryk Peltonen Bond Portfolio on eToro - 10.2% Annual Return

    This particular UK bond is not a bond instrument per-say. On the contrary, it relates to the highly successful bond portfolio of independent eToro trader Patryk Peltonen. For those unaware, FCA regulated broker eToro allows you to copy the trades of other investors. You get to choose which investor you want to copy based on their historical trading results.

    At the forefront of this is Patryk Peltonen - who has an excellent track record in buying and selling bonds at the platform. In the last 12 months alone, the trader has netted his backers 10.2% in gains. The individual has a passion for bond funds, so his basket is highly diversified. What we also like about Peltonen is that he is not afraid to short the markets.

    In other words, if he thinks that a particular bond investment is overvalued, he'll have no hesitations in placing a short-sell order. Although his bond portfolio achieved double-digit growth last year, it is worth noting that the underlying assets that he invests in are high-grade instruments.

    Our Rating

    • Catered to newbie traders
    • 0% commission on ETFs and stocks
    • Supports heaps of everyday payment methods
    • Minimum withdrawal of $50
    • High spreads
    • MT4/5 not available
    67% of retail investor accounts lose money when trading CFDs with this provider.

    6. SPDR Bloomberg Barclays High Yield Bond ETF on eToro – 5.20% Annual Return

    If you have a high risk tolerance you may be interested in the SPDR Bloomberg Barclays High Yield Bond ETF. As you may have already guessed, this UK bond ETF focuses on financial instruments that have high yields. As a result, this will allow you to target higher financial returns.

    Overall, this exchange-traded fund covers more than 1,000 individual corporate-issued bonds. This also means that you’ll be gaining exposure to a wide range of sectors such as energy, technology, telecommunications, and more.

    While these bonds attract a higher yield, the largest holding within the exchange-traded fund accounts for 1.06%. Some of the bonds you will be investing in include Vodafone, Ford Motors, Tenet Healthcare and more.

    If we turn our attention to the bond’s past performance, we can see that it has generated an average annual return of 5.20% since its inception back in 2007. If you look at it from a 1-Year daily total return viewpoint, this bond ETF has generated 8.34% returns. Furthermore, the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) has managed to keep its annual total return above the 4.50% mark throughout 2020.

    Our Rating

    • Ideal for beginner traders
    • Commission-free stock and ETF trading
    • Supports a wide range of payment methods
    • $10 inactivity fee after 12 months
    • $5 withdrawal fee
    • MT4/5 not available
    67% of retail investor accounts lose money when trading CFDs with this provider.

    7. iShares Corp Bond UCITS ETF on eToro – 2.50% Annual Return

    The iShares Corp Bond UCITS ETF focuses primarily on corporate bonds. This means that you can target higher returns as corporate bond yields are usually higher than government bonds.

    Overall, this iShares ETF covers more than 2,300 bonds from a bunch of sectors. All the corporate bonds listed in the ETF are issued by blue-chip US companies such as Goldman Sachs, Boeing, Microsoft, AT&T and more.

    While corporate bonds are intrinsically more volatile and therefore come with greater risks, the iShares Corp Bond UCITS ETF is well diversified. As well as covering a wide range of bonds, the largest weighting in the bond ETF is just 0.39%. This means that you are not over-exposed to a particular bond instrument - should the issuer run into financial difficulties.

    When it comes to past performance, the iShares Corp Bond UCITS ETF has generated an average annual return of 2.50% as of 31/Aug/2021. The Total Expense Ratio (TER), which includes the management fee and various other fees including trustee, custody, registration charges and other operating fees, is currently just 0.20%. This means that for every £1,000 you invest, the TER will be just £2.

    Our Rating

    • Copy successful investors
    • 0% commission on bond ETFs and stocks
    • Minimum investment £200
    • Minimum withdrawal of £50
    • Limited number of assets compared to IG
    • MT4/5 not available
    67% of retail investor accounts lose money when trading CFDs with this provider.

    8. PIMCO Active Bond Exchange-Traded Fund - 0.57% Net Expense Ratio

    Most bond ETFs concentrate on a particular market, but what about if you’re looking to gain exposure to multiple international markets? If you fall into this category of investors looking to diversify your portfolio then it could be a good idea to consider investing in the PIMCO Active Bond Exchange-Traded Fund.

    When it comes to diversification, US bonds account for 102.58%, Non-US bonds account for 13.27%, non-US stocks account for 0.05%, and corporate bonds account for 32.73%. Since you will be gaining exposure to various bond marketplaces, the expense ratio is somewhat more expensive than other ETFs, but it is still a relatively small amount. This means that per £1,000 you invest you will have to pay £5.70.

    The PIMCO Active Bond ETF had an average annualized return of 7.63% in 2020, with a YTD annual return of 0.37%.

    Our Rating

    • Free demo account
    • 0% commission on bond ETFs and stocks
    • Market leading spreads
    • $10 inactivity fee after 12 months
    • Does not support MT4 or MT5
    • Rather basic for advanced traders
    67% of retail investor accounts lose money when trading CFDs with this provider.

    9. Japan Govt Bond on AvaTrade - Gain Exposure to the SGX

    In the second week of September, the yield on the benchmark Japan 10-year JGB surged to 0.05 percent, its highest level in almost two months, amid concerns of additional monetary stimulus.

    Recent announcements by Japanese Prime Minister Yoshihide Suga to withdraw from running for the leadership position have alarmed investors, who fear that the next leader will increase fiscal spending.

    A Japanese Government Bond (JGB) is as the name suggests a bond issued by the government of Japan. The Government pays interest on the bond until the maturity date is reached. Japanese Government Bonds have become a key component of the country’s central bank measures to boost inflation rates.

    As of 2020, the central bank possesses nearly half of all Japanese government bonds. Interest rates and bond prices, which are determined by market supply and demand, have an inverse connection. The demand for JGBs rises as a result of heavy buying, resulting in a rise in the price of the bonds.

    Our Rating

    • Low non-trading fees
    • No deposit or withdrawal fees
    • $100 minimum initial deposit
    • High inactivity and annual administration fees
    • Fractional share trading is not supported
    • Limited to CFDs
    67% of retail investor accounts lose money when trading CFDs with this provider.

    10. Vanguard Intermediate-Term Corporate Bond ETF (VCIT) on eToro - 3.02% Average Annual Return

    If you’re hunting for higher yields in comparison to aggregate bond funds that are primarily weighted towards minimal-risk government bonds, the Vanguard Intermediate-Term Corporate Bond ETF provides a way to gain access to corporate bonds.

    The bonds covered in the VCIT ETF are issued from top-rated companies including the Bank of America Corp., Allstate Corp, UnitedHealth Group Inc, and other popular blue-chip stocks listed on US exchanges. This $46 billion exchange-traded fund is amongst the largest of its kind on Wall Street, meaning you can use it as a long-term investment.

    In terms of the broker itself, eToro is one of the leading social trading platforms with over 20 million traders worldwide. If the notion of building your own diversified portfolio of ETFs and stocks is too daunting, you can opt for CopyPortfolios or CopyTrader. These are eToro’s innovative copy trading features that allow you to copy the trading strategies and portfolios of expert traders with the click of a button.

    Our Rating

    • Free demo account
    • 0% commission on bond ETFs and stocks
    • Market leading spreads
    • $10 inactivity fee after 12 months
    • Does not support MT4 or MT5
    • Rather basic for advanced traders
    67% of retail investor accounts lose money when trading CFDs with this provider.

    How to Buy Bonds from eToro

    So now that you’ve had the chance to browse through our top five UK bond picks of 2021, we are now going to show you how to make an investment today. We have decided to show you the process with regulated platform eToro, albeit, the process works largely the same regardless of which broker you opt for. Furthermore, we’ve specifically shown you the steps of how to buy our top-rated 2021 bond – the Vanguard Total Market Index Bond ETF.

    Note: As is the case with all FCA regulated brokers, you will need to verify your identity before you can buy bonds with eToro. Don’t worry, the process is super-easy, and simply requires you to upload a copy of your passport or driver’s license.

    Step 1: Open an Account

    Your first port of call will be to open an account with eToro. This will require some basic personal information from you, such as your:

    • First and Last Name
    • Home Address
    • Date of Birth
    • National Insurance Number
    • Telephone Number
    • Email Address

    Step 2: Upload Your ID

    To bypass the KYC (Know Your Customer) process as quickly as possible, upload a clear copy of your passport or driver’s license. The eToro system should be able to validate this on the spot.

    How To Buy UK - how to verify your identity when buying bonds

    Step 3: Deposit Funds

    Top-rated brokers like eToro give you a range of payment methods to choose from. This includes debit/credit cards (Visa, MasterCard, Maestro), e-wallets (Paypal, Skrill, Neteller), and a bank transfer. Apart from the bank account option, all other deposits are free. Take note, you will need to meet a $200 (GBP-equivalent) minimum deposit amount at eToro.

    Step 4: Search for Vanguard Total Market Fund

    Now that you have funded your newly created account, you are ready to buy your chosen bonds. In this example, we are showing you how to invest in the Vanguard Total Market Bond Fund, although you can invest in any bond instrument that you want.

    How To Buy UK...

    Nevertheless, at the top of the screen, enter ‘VANGUARD TOTAL BOND’, and click on the corresponding result.

    Step 5: Click on ‘Trade’

    You will now be able to see some market stats on the Vanguard Total Market Bond Fund. To proceed with your investment, click on the ‘Trade’ button.

    Step 6: Set up Order and Buy Bonds’

    This is where things get a little bit complex. The reason for this is that you will need to set up an order form before you can invest in your chosen bonds. This ensures that you are able to place a customized trade that meets your long-term investment goals.

    How To Buy UK Bonds - Buy bonds on eToro | Learnbonds

    As such, be sure to refer to the points outlined below when filling in your order form.

    • Amount: This is the amount that you wish to invest in pounds and pence, and NOT the number of bonds that you wish to trade. For example, if you want to buy £300 worth of bonds, enter £300 into the ‘amount’ box.
    • Set Rate: This refers to the price that you wish to buy the bonds at. If you want to take the current market price, leave the ‘set rate’ box as a ‘market order’. If you want to enter at a specific price, change it to a ‘limit order’.
    • Stop Loss: This allows you to exit your bond trade at a pre-defined market price. In doing so, you will mitigate your losses in the event the trade goes against you.
    • Take Profit: This allows you to exit your trade when you hit a pre-defined profit target.

    Finally, click on ‘Buy’ to complete your order.

    How do UK Bonds Work?

    The UK bond space is a multi-billion pound arena, with heaps of bond types to choose from. This includes everything from corporate bonds, government bonds, municipal bonds, and savings bonds. However, much of the UK bond space is reserved for institutional money. By this, we mean that you need to meet a minimum lot size to get a look in, which can often exceed 6-figures. As such, this makes it very difficult for the Average Joe to invest.

    The good news, however, is that there are a number of options open to everyday retail investors in the form of bond ETFs. In a nutshell, these bond types allow you to speculate on the future direction of a bond. For example, if you think that the value of UK Gilts is overpriced, you can place a sell order to short it.

    This means that were the value of Gilts to go down in the open market, you would make a profit.  An additional option available to you as a retail investor is a bond ETF fund. This is where the fund manager buys and sells bonds on your behalf. This allows you to make money on two fronts without needing to have any knowledge of how UK bonds work.

    Firstly, you will receive your share any coupon payments as and when they are distributed. Funds normally credit your account on a monthly or quarterly basis. Secondly, bond ETF funds also allow you to benefit from capital gains. This will be the case if the underlying bond basket increases in value and thus – the value of the ETF goes up.

    Account Minimums and Payments

    When it comes to paying for your bond investment, regulated bond brokers like eToro, AVATrade, and Markets.com allow you to deposit funds with a range of payment methods.

    This generally includes:

    • Debit Cards
    • Credit Cards
    • Paypal
    • Neteller
    • Skrill
    • Local Bank Transfer
    • International Bank Wire

    You will be able to withdraw your profits back to the same method that you used to fund your account. All deposits – apart from bank transfers, are typically credited instantly.

    This allows you to complete the bond investment process in a matter of minutes. In terms of account minimums, this will vary from broker-to-broker. In most cases, this will average the £50-£150 mark.

    Fees for Buying Bonds 

    When it comes to the fees involved when buying bonds on eToro, you will find that buying and selling bond ETFs are commission-free. Most bonds are initially purchased from the issuer in lots by central banks, hedge funds, or insurance firms. Central banks can charge a commission on the sale or they may be compensated via the bid/ask spread. 

    It’s typically easier for investors to buy a bond fund, as bond ETFs can be bought and sold just like stocks. 

    Broker Bond Trading Account Management Fees
    eToro 0% Commission None
    Fineco Bank £6.95 per order None
    IG Invest in bond market ETFs from just £3 commission None
    Hargreaves Lansdown 0-9 deals incur a dealing charge of £11.95, while 20 or more deals incur a dealing charge of £5.95. ISA account: 0.45% a year, while Fund & Share Account has no charge.
    Markets.com Spread varies depending on Bond instrument. For example, the typical spread for US TBond 30Y is $0.07 None

    UK Bond Brokers – Regulation and Safety

    How To Buy UK bonds - FCA Logo | LearnbondsWith hundreds of bond brokers now active in the UK market, knowing which platform to sign up with can be challenging. With that said, the most important factor that you need to look out for is whether or not the broker is regulated. While most brokers do hold the required regulatory remit to facilitate bond trades – unfortunately, this isn’t always the case.

    This is why we only recommend UK bond brokers that are heavily regulated. In the vast majority of cases, our recommended brokers will hold multiple licenses – including that of the UK’s Financial Conduct Authority (FCA). Other tier-one licenses might include ASIC (Australia), MAS (Singapore), and CySEC (Cyprus).

    Types of UK Bonds

    Premium Bonds UK

    Premium Bonds, also known as Lottery Bonds, refer to a special type of bond issued by the British Government through the National Savings and Investment Scheme. It is different from other types of bonds in the sense that instead of offering guaranteed, regular, and competitively priced interest rates, premium bonds get you fixed into a monthly lottery scheme. Here, you stand to win between £25 and £1 million and other interest-free rewards.

    Ideally, you can invest a minimum of £25 and a maximum of £50,000. And for every £1 you spend on premium bonds, you get one unique bond number and an entry into the monthly draw. For example, if you invest £200, you will get 200 bond numbers. Therefore, the higher your contribution, the higher your chances of winning.

    Anyone above 16 years can buy themselves a bond or on behalf of their child, grandchild, or great-grandchildren. You can buy the bonds online on the NS&I website or by calling their customer service team. You are also free to cash in the bond at any time by calling the NS&I team or downloading the Premium Bonds Cashing In Form, entering your cash-in request, and posting it to NS&I.

    Government Bonds UK

    Government bonds, also known as Gilts, Treasury stocks, or Treasury Gilts, refer to debt-based investment where you loan money to a government in exchange for an agreed interest rate for a specific period. The three unique features of a government bond include the fact that the money is lent to the Government, the Government pays a fixed interest rate at regular intervals (coupon), and they have a predetermined maturity date of say 3, 6, or 12 months and as much as 55 years.

    Gilts with a maturity period of fewer than 12 months are referred to as Treasury Bills. Guilts with a maturity of fewer than 10 years are referred to as Treasury Notes while the rest with a maturity of above 10 years are referred to as Treasury Bonds. There also are the inflation-protected bonds, also known as Index-Linked Gilts. These don’t have a fixed coupon rate, but their interest rates move along the UK Retail Prices Index (RPI).

    The Bills, notes, and bonds are sold to the public through the Debt Management Office (DMO) via a public auction and you can participate by placing a bid on the DMO website. You will first need to pass the Approved Group of Investor criteria set by DMO. Most of these Gilts are later exchanged through the secondary markets like brokerages either online or over the phone. You may also invest indirectly via the Mutual funds, ETFs, or even CFDs.

    Are UK bonds a good investment?

    The answer to this question depends on your risk tolerance and trading goals. With that said, if you’re the type of investor who cannot stomach the notion of losing invested capital, UK bonds may be a more suitable option for you. In contrast, the stock market is notoriously volatile, which makes UK bonds a safer investment.

    On the other hand, if the majority of your portfolio is made up of stocks, bonds are an effective way to diversify and hedge against market volatility in both the long and short term.

    Alternatively, if you’re looking to save for retirement or are already retired, you may not have the same time horizon as someone in their mid-twenties looking to buy and hold UK bonds for 30 years. In this case bonds offer a safer place to invest your money. After all, it’s common for market analysts and wealth managers to recommend a portfolio that gravitates more towards bonds as investors grow older. While this is a more conservative approach to investing, it’s still a good idea to have some quality stocks in your portfolio regardless of whether you’re retired or not.  

    Should I invest in UK bonds? 

    Bonds can play a key role in hedging against market volatility, especially in the long term. UK bonds provide predictable returns without the need for complex trading strategies such as scalping and day trading. Furthermore, bonds are highly sought-after amongst long-term investors. 

    For instance, you might decide to purchase UK bonds in your early 20s to put into an IRA account. Some investors also buy bonds to give to their kids to cash out as a down payment on a mortgage or tuition fees.

    • Bonds provide a steady stream of passive income.
    • Bonds enable you to diversify your portfolio
    • Some bonds are tax-free

    Glossary of Bond Terms 

    Bonds Glossary

    A bond is when companies or governments need to generate funds and when you invest you will receive lump sump back with interest at the end of your agreement.

    Bonds Glossary

    Gilts refer to the bonds and debt securities issued by the UK government through the Debt Management Office. They carry fixed interest rates and are categorised among the most secure forms of investment as they are government backed thus have never failed to pay interest or repay back capital upon maturity.

    Bonds Glossary
    Municipal Bonds

    A Municipal Bond is usually issued by United Kingdom Municipal Bonds Agency to finance public projects initiated by the local authority such as roads, drainage, and schools. You will receive you lump sum and interest back at the end of the term.

    Bonds Glossary
    Corporate Bonds

    A Corporate Bond is issued by businesses to raise funds for expansions or projects. You will recieve you lump sum and interest back at the end of the term.

    Bonds Glossary
    Premium Bonds

    A Bond that has no interest rate but your investments are entered into prize draws to win £25 to £1mil.

    Trading Platforms Glossary
    Savings Bond

    Usually offered by Banks and Building Societies, Saving Bonds will last for a fixed term and earn interest. You are not able to access the money during the fixed term.

    Trading Platforms Glossary
    Fixed Rate Bonds

    A Fixed Bond will start and end with same Interest Rate.


    In summary, although the UK bond space is vast – access from the perspective of an everyday retail trader is limited. As noted in this article, this is because bond issuers typically require a minimum lot size that can often exceed £100,000. With that being said, regulated brokers like eToro allow you to buy and sell a range of bond ETFs, meaning that you can get started with an investment in less than 10 minutes.

    Most importantly, there is no minimum lot size to contend with, so you can speculate on the future value of a bond, or group of bonds, with small amounts. It might also be worth considering a bond ETF fund, which is the best option if you are looking to earn passive income.

    This is because fund providers like Vanguard will buy and sell bond instruments on your behalf, so you won’t be required to actively manage your investments.  Crucially, whichever UK bond broker you do opt for, just make sure that it holds a regulatory license with the FCA. Click here to get started at eToro.


    Are bond brokers in the UK regulated?

    Most, but not all, bond brokers trading in the UK are regulated. If they aren't, then the broker is operating without the legal remit to do so. We only recommended brokers that are regulated by tier-one licensing bodies like the UK's FCA.

    What are bond ETFs?

    Bond ETFs allow you to speculate on the future value of a bond (such as UK Gilts), or group of bonds (like a basket of US Treasuries), without you owning the underlying asset. Instead, you are speculating on whether the bond will increase (buy order) or decrease (sell order) in value.

    How do I make money with bonds?

    This depends on the type of bond that you invest in. If you entrust your money with a leading bond ETF fund provider, you will make money from coupon payments and capital gains - proportionate to the amount that you invest,

    Why can't I buy UK corporate bonds direct from the issuer?

    When publically-listed companies issue bonds, they usually require a minimum lot size of 6/7 figures. This means that everyday traders often do not get a look in.

    What is the minimum investment to buy UK bonds?

    If you're using a regulated broker that offers bond ETFs, you can normally invest as little as you like. You will, however, need to meet a minimum deposit amount. This varies from broker-to-broker.

    Why does the UK government issue bonds?

    Known as 'Gilts', the UK government issues bonds as a means to raise money to help pay for frontline services. This allows it to meet its spending targets without borrowing funds from the Bank of England.

    How much do UK bonds pay?

    This can vary wildly. For example, if you invest in UK Gilts, the coupon rate will rarely exceed 1-2%. Corporate bonds, however, pay much more, as the risks of default are higher.

    What payment methods do UK bond brokers offer?

    If the bond broker is targeting the retail investor space, then it will typically offer a range of everyday payment methods. This should include a bank transfer and debit/credit card at a minimum, and in some cases, e-wallets too.

    Can I trade UK bonds on my phone?

    Most of the bond brokers listed on this page offer a fully-fledged mobile app. Usually available on both Android and iOS devices - this allows you to buy and sell UK bonds on the move.

    Can I buy UK government bonds?

    You can purchase UK government bonds, otherwise referred to as gilts, from UK brokers or by going directly to the Debt Management Office. The UK Government sells bonds to fund monetary policies or other political agendas such as developing infrastructure and are typically fixed interest securities designed to generate a steady income flow.

    What is the interest rate on UK government bonds?

    The UK 10Y government bond has a 0.74% yield and a 0.10% Central Bank Rate.

    How much do UK bonds cost?

    Although some bonds can be bought with a £1 minimum investment, investors typically need around £100 to invest in UK bonds. However, some bonds require a much larger deposit of £1,000 or more. For example, the GTGBP5Y:GOV UK Gilt 5 Year Yield has a current asking price of £99.97, while the Nationwide Building Society corporate bond has a price of £314.00.

    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.

    Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of online publications.

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