Fixed Income Trading

Reviewed by Anjaneyulu | Updated on Nov 05, 2021


What is Fixed Income Trading?

Fixed income trading is the process of trading fixed income securities. The fixed income market has a large, diverse collection of market participants as it consists of low transaction costs, a competitive market structure. Institutional investors dominate the fixed income securities market.

Fixed-income security is a claim on the particular periodic income stream from interest paid on borrowed funds. There are different types of financial instruments that make up the fixed income market which includes government or corporate bonds.

What are the advantages of Fixed Income Trading?

Investors invest in different types of fixed income securities to achieve different investing goals.The investor will get tax advantages, as the income received from them is usually tax-free.

All fixed income securities provide some form of regular interest payments to investors. This market is especially attractive to investors whose main investment objective is to get a steady income.

Who should consider it?

The investor who is aiming to make maximum capital gains should primarily invest in low-rated securities. If interest rates are likely to fall in future, investing fixed income securities results in strong capital gains.

Risk-averse investors mean an investor who does not want to take the risk. He should invest in securities with short maturity periods to reduce interest rate risk as well they can invest in high credit rating securities to avoid default risk.

The government of India needs to think about having policies in place to make the fixed income market attractive. This will help in spend a large amount on infrastructure facilities.

Globally, fixed income markets are larger than equity markets, yet India is trying to develop a market of its own.


There are a variety of fixed-income investments and investment strategies available. The investor should make sure to research any fixed income opportunity before investing thoroughly. Many bonds have long maturity dates such as ten years or more. Investing in a bond means tying up a substantial amount of your investment capital for a long period; the investor has to make sure to the best use of money with his choice of investments.

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