What is a 'bond'? Definition & meaning

Learn what a bond is

When governments and companies want to raise money, they’ll often do so by issuing bonds.
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Bonds are effectively promissory notes. In return for buying bonds, investors will receive the money they put in back, plus interest.
Investors usually buy bonds because they promise a fixed return, in the form of interest, that is supposed to be paid back at one or several preset dates.
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As the interest rate paid on bonds is usually fixed and pre-set, it’s common for bonds to be referred to as ‘fixed-income’ investments. Today, not all bonds have a fixed interest rate. Many are now issued with variable or floating interest rates, which change over time.

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Deep dive: What are bonds and why investors buy them?

More terms

Xetra

A trading venue operated by the Frankfurt Stock Exchange.

Over-The-Counter (OTC)

A security that is sold outside of an exchange.

Real Estate Investment Trust (REIT)

An investment trust specialised in investing in commercial property such as parking garages or GP offices.

Quantitative easing

Find out what quantitative easing is and how central banks use this monetary measure to encourage economic growth.

Clean price

The quoted price of a gilt, which excludes accrued interest

Unicorn

A startup valued at over £1 billion. They are rare, hence the name.

Diversification

An investment strategy in which money is put into a variety assets.

Limit order

Learn what a limit order is and how to use it to make the most of your portfolio.

SPAC

Find our what a SPAc or special purpose acquisition company is.

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What is a bond?