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BondA 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.BondThe 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 MatchesIncome bondIncome bondA bond which provides income over its life and at maturity the original investment is returned. See: 'guaranteed income bond'. Discount bondDiscount bondDebt sold for less than its principal value. If a discount bond pays no coupon, it is called a zero coupon bond. Reset bondsReset bondsBonds that allow the initial interest rates to be adjusted on specific dates in order that the bonds trade at the value they had when they were issued. Moral obligation bondMoral obligation bondA 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 . Companion bondsCompanion bondsA class of a Collateralized Mortgage Obligation (CMO) whose principal is paid off first when the underlying mortgages are prepaid due to falling interest rates. When interest rates rise, there will be lower prepayments of the principal; companion bonds therefore absorb most of the prepayment risk of a CMO. Further Suggestionsperformance bondsecured bond Authority bond investment bond Term bonds Bond premium Convertible bond Refunded bond Insured bond Short term bond fund Special bond account Perpetual bond Bond of Indemnity Samurai bond Hospital revenue bond Z bond children's bonus bond Obligation bond Story stock or bond Variable rated demand bond (VRDB) Guaranteed bond Short bonds Long bonds Blanket fidelity bond Prerefunded bond |
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