(1) Using bonds to diversify one's portfolio and reduce losses
The relationship between equities and bonds is not straightforward because the riskier the bond is, the more correlated is to the stock market. However, bonds such as the U.S. Treasuries and Bunds are negatively correlated with the stock market because they are perceived as risk-free assets, thus safe-havens. Safe-havens are instruments that are expected to retain or increase in value during times of high market downturns.
For example, in February and March 2020, investors sold stocks to buy U.S. Treasuries and Bunds in an attempt to find shelter as chaos unfolded. This behaviour aggravated the stock market selloff, and while in the U.S. Treasuries went up as much as 9%, the S&P fell more than 30%. This is the perfect example of why bonds are a vital component of a well-balanced portfolio because they provide diversification and reduce losses.
How can I trade U.S. Treasuries and Bund on the Saxo Platform?
a. Buy cash bonds. This can be easily be done by searching the bond you would like to purchase on the search toolbox. The ISIN for the 10-year Benchmark bonds for U.S. Treasuries and Bund are
Benchmark safe-haven ISINs
Ten-Years U.S. Treasuries
b. Buy ETFs investing in U.S. Treasuries and Bunds
TLH - iShares Barclays 10-20 Year Treasury Bond Fund
IEF - iShares USD Treasury Bond 7-10yr ETF
SHY- iShares USD Treasury Bond 1-3yr UCITS ETF
D5BB - Xtrackers II Germany Government Bond UCITS ETF
D5BC - Xtrackers II Germany Government Bond 1-3 UCITS ETF
EXHD- iShares eb.rexx Government Germany 5.5-10.5 UCITS ETF