Placing a buy or sell order for a corporate or government bond is different from placing an order for a stock or ETF. Due to the nature of how bonds work, when investing in bonds you do not specify the amount of bonds you would like to buy or sell and how much you are willing to pay or receive for each - as is the case for stocks and ETFs.
Instead, you specify how much money you would like to have invested in a bond (the nominal value) and how much you are willing to pay for that investment expressed in a percentage of the bond's par value (the limit price). When determining the price for a bond, you are thus essentially answering the question of how much you are willing to over or underpay to receive a specified amount of money. This is because the intrinsic value of a bond is generally a given, since it consists of the par value that will be returned to the bond holder upon maturity plus the coupon payments during the bond's lifetime.
Different order types
When placing an order for a bond, you have the option of entering four different order types: a limit order, a market order, a stoploss order, and a stoplimit order. The main difference between these order types is whether or not you determine a fixed maximum (or minimum) price that you are willing to pay (or receive) for your order. If you choose a market or stoploss order, you do not specify this price and will only determine how much nominal value you want to invest or receive. For more information, see "What is the difference between a limit order and a market order?" and "What is the difference between a stop loss order and a stop limit order?".
Good to know
- Although bond prices are generally a percentage of the par value, our platform will express them in a monetary value. There is no practical difference between these two ways of pricing since 100% of €100 is €100.