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

Hospital revenue bond

Hospital revenue bond

A bond issued to finance construction of a hospital by a municipal or state agency.


Payment in kind (PIK) bond

Payment in kind (PIK) bond

A bond that gives the issuer an option (during an initial period) either to make coupon payments in cash or in the form of additional bonds.


International bonds

International bonds

A collective term that refers to global bonds, Eurobonds, and foreign bonds.


Equity linked Eurobonds

Equity linked Eurobonds

A Eurobond including a convertibility option or warrant.


Pure discount bond

Pure discount bond

A bond that will make only one payment of bond and bond. Also called a bond or a single-payment bond.


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