Bond

 

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Bond

A debt instrument, issued by a borrower and promising a specified stream of payments to the purchaser, usually regular interest payments plus a final repayment of principal. Bonds are exchanged on open markets including, in the absence of capital controls, internationally, providing a mechanism for international capital mobility.

Bond

The generic name for a tradable loan security issued by governments and companies as a means of raising capital.The bond guarantees its holder:repayment of capital at a future specified date (the maturity date)a fixed rate of interest (also known as the coupon)Government bonds are known as gilts or Treasury Stock.Bonds offer certainty of income, but may fail to keep pace with inflation.As far as the capital is concerned, you only know exactly how much your bond is worth if you plan to hold it to maturity (when you will be paid back the face value). But in the time between issue and maturity, a bond's value can be as volatile as a share, and if you plan to sell before maturity you run the risk of capital erosion. In general:Bond prices fall when bank interest rates go up (because the interest rate rise attracts money out of bonds into cash)Fear of rising inflation will cause bond prices to fall, because investors worry that bonds will not bring enough income to keep pace with inflationThe German and American bond markets have an effect on UK bond prices, because they are competing for the same institutional capital.



Similar Matches

Bond power

Bond power

A form used in the transfer of registered bonds from one owner to a different owner.


Full coupon bond

Full coupon bond

A bond with a coupon equal to the going market rate; the bond is therefore selling at par.


Single payment bond

Single payment bond

A bond that makes only one payment of principal and interest.


Automated bond system (ABS)

Automated bond system (ABS)

The computerized system that records bids and offers for inactively traded bonds until they are cancelled or executed on the NYSE.


Bond indexing

Bond indexing

Designing a bond portfolio so that its performance will match the performance of some bond index.


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