How To Invest In Bonds in UAE – Guide

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Bonds are an important part of a well-diversified investment portfolio because they carry less risk than other assets and provide the bond holder with a fix income. The most common way for UAE investors to buy bonds is through a online broker like eToro. Alternatively, they can buy bonds directly from the UAE treasury.

In this guide we go over different ways of how to invest in bonds in UAE, what are the different types of bonds and pros & cons of bond investments.

Quick Facts About Bonds – What You Need To Know

Bonds are security agreements between investors (creditor) and bond issuers (debtor) to pay the investor interest on money loaned. When a bond matures the bond issuer repays the principal of the bond and an agreed-upon interest rate. There are corporate, government and municipal bonds. Bonds can have fixed rates or floating rates. A fixed-rate bond has a pre-specified interest rate whilst a floating rate bond’s interest rate fluctuates according to the market. 

Most bond issuers pay their investors quarterly or semi-annually. The interest payments on bonds are called coupons. When a bond’s price increases, the coupon payment stays the same, and the bond’s yield decreases. When a bond decreases in value, the coupon payment also stays the same, increasing the yield of the bond. The movement of interest rates, the creditworthiness of the borrower, and investor sentiment influence bond prices.

Buying and Selling Bonds In UAE

There are 3 different ways of buying and selling bonds in UAE.

  • Buying bonds through a brokerage account – Buying individual bonds through a broker is recommended to advanced traders, because of the overwhelming options, variety of different fees and analysis needed.
  • Buying mutual fund bonds or ETFs – Mutual fund bonds and ETFs are a good way to diversify your portfolio because they give you exposure to multiple bonds. With these financial instruments, you don’t need to invest in a specific bond. They are also tax-efficient and have lower fees.
  • Buying bonds directly from the UAE treasury – There are AED T-bonds with two, three, five, and ten years maturity rates. 

Why To Invest in Bonds as a UAE Investor?

There are positives and negatives of investing into bonds.

Advantages of Investing In Bonds in UAE:

  • Bonds are a great choice for investors looking for a fixed income stream. Based on the agreement, the bond holder gets paid out a regular income at fixed intervals (monthly, annually, semi-annually) if holds the bond.
  • Bonds are also a great way to hedge your investment portfolio with securities that are less volatile (portfolio hedge). Bonds aren’t as volatile as stocks and other financial instruments. 

Disadvantages of Investing in Bonds:

The disadvantages of investing in bonds are rising interest rates, credit risk, and market volatility. Bond prices drop when interest rates are increased. The issuer may not be able to pay back the bond and the bond market can be volatile.

Quick Guide on How to Buy Bonds In UAE

There are 3 different ways to invest in bonds from the UAE:

  1. Invest in International Bonds from UAE
  2. Invest in local National Bonds of UAE
  3. Invest in Bond ETFs

Below we break down the 3 different ways to invest in Bonds in UAE, starting with international bonds.

01. Buy International Bonds

You can buy international bonds by opening a brokerage account with one of the brokers that offer international bonds like eToro, AvaTrade or Interactive Brokers. You can open a brokerage account with these brokers for $100. 

  • eToro:
  • AVAtrade:

02. Buy UAE National Bonds

When you are buying national bonds you are investing in UAE government owned companies. National bonds are the most stable and secure investment option with average return rates. Find more info on how to buy UAE National bonds in our guide.

You can buy UAE national bonds from 100 AED through Nationalbonds.ae

03. Invest in Bonds ETFs

You can buy exchange-traded funds that only invest in bonds via online brokers. These ETFs are like bond mutual funds that invest in multiple short and long-term bonds of different companies and governments. If you want to invest in single stocks or share than we recommend you to check out our list of recommended stock brokers here.

How to Buy International Bonds Using eToro

The most common way to buy bonds in UAE is through an online broker like eToro. Their minimum deposit is 200 AED and you can buy bonds for a low as $10 minimum trade. eToro offers commission-free bond, stock, forex, and cryptocurrency trading. 

Below sections breaks down the steps you need to take to invest in Bonds through eToro

STEP 1: Visit the eToro official website

Click on link to the eToro stock section here: https://www.etoro.com

STEP 2: Click on the green “Get Started” Button

etoro-get-started-with-bonds

STEP 3: Create and Verify Your Account

To buy bonds with eToro you need to sign up, verify your account and make a first time deposit over AED200. This will enable you to buy, hold and sell bonds and other assets available on eToro.

buy-bonds-with-etoro-mobile-app

STEP 4: Buy Bonds

You can buy, hold and sell bonds that are available on eToro.

Conclusion

Bonds are an essential part of an investment portfolio because they generate income and are less volatile than other financial instruments. The returns on bonds are lower than on stocks but higher than the yearly inflation rates. This makes bonds interesting for retirement plans.

You can get started with investing in Bonds at eToro or other brokers like AvaTrade and Interactive Brokers. 

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Stefan Grasic (Dipl.-Jur) is the World Wide Director of research for Buisness24-7 and has considerable experience in the financial and investment niche, but also enjoys writing articles for the general readership. Stefan is an active Crypto, Forex and general investment researcher advising blockchain companies at their start up level. He keeps fit by mountain biking, surfing, skiing and lots of other adrenaline sports.