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

Fidelity bond

Fidelity bond

See: Blanket fidelity bond


Variable rated demand bond (VRDB)

Variable rated demand bond (VRDB)

Floating-rate bond that periodically can be sold back to the issuer.


Samurai bond

Samurai bond

A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: Bulldog bond and Yankee bond.


Moral obligation bond

Moral obligation bond

A tax-exempt bond issued by a municipality or a state financial intermediary that is backed by the moral, but not legal, obligation of a state government to appropriate funds in case of default .


Discount bond

Discount bond

Debt sold for less than its principal value. If a discount bond pays no coupon, it is called a zero coupon bond.


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