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

Deferred interest bond

Deferred interest bond

A bond that pays interest at a later date, usually in one lump sum, effectively reinvesting interest earned over the life of the bond. See: Zero coupon bond.


Bond agreement

Bond agreement

A contract for privately placed debt.


Registered bond

Registered bond

A bond whose issuer records ownership and interest payments. Differs from a bearer bond, which is traded without record of ownership and whose possession is the only evidence of ownership.


Municipal revenue bond

Municipal revenue bond

A bond issued to finance a public project that is funded by the revenues of the project.


Commodity backed bond

Commodity backed bond

A bond with interest payments tied to the price of an underlying commodity.


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