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

Dollar bonds

Dollar bonds

Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with "US Dollar" bonds, a common term of reference in the Eurobond market.


Bond agreement

Bond agreement

A contract for privately placed debt.


Variable rated demand bond (VRDB)

Variable rated demand bond (VRDB)

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


Bond discount

Bond discount

The difference between a bond's face value and the lower market price.If the market price is higher than the face value, the difference is known as the bond premium.When interest rates rise, it is usual for bond prices to fall and when interest rates fall it is usual for bond prices to increase.


Government bond

Government bond

See: Government securities


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