Bonds Definition

bond is an investment where creditors can get a fixed income, already known at the time of purchase

Purchasing bonds, investors loan money to an entity, which is obliged to refund money and interests in pre-established times.

Bonds issuers are tipically:

  • Companies
  • Municipalities
  • States and Sovereign Governments

They use bonds to gather money and finance their activities.

Investors (or creditors, or bondholders) usually buy bonds to ensure fixed incomes of money, avoiding the uncertainty of the stock markets, where prices can not be determined in advance.

When issuers can’t refund bonds within the specified period, it’s possible that creditors lose part of their money and, in the worst cases, the full amount of their investments. It’s the bond default case.

Very often, bonds are negotiable in secondary market too. It means that investors can buy their bonds not directly from issuers, but they can exchange them in markets. In this case, the purchasing price can be very different from the original issue price (it can be higher or lower).

There are bonds which pay variable interests, too. In this case, the exact amount of interests is unknown at the time of purchase. You know in advance only which is the formula or algorithm used to calculate interests and/or amount received at bond expiration (maturity date).

In this website you can find updated Government Bonds yields. In order to exchange them in the market, you can ask your broker or bank or financial provider.

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