Bonds represent a major asset class that differs from stocks by being perceived as lower-risk and offering stable returns. They are categorized into either government bonds or corporate bonds. Out of these, government bonds are seen as some of the safest investments in the world, and this is the type of bond most often offered by CFD brokers.
Some traders and investors like to use bonds to smooth out the volatile returns from stocks in their portfolio. In fact, it is a widely accepted long-term investment principle to keep an allocation of 60% stocks and 40% bonds in a portfolio. The good thing about bond CFDs in particular is that they also make it practical to take shorter-term positions in this market, with leverage that can help a trader profit even from small price changes in the underlying market.