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

Accounting standards

The rules a company follows when preparing financial statements.

Real Estate Investment Trust (REIT)

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

Ponzi Scheme

A form of fraud designed to lure new investors, and pays the earlier backers by using the new investors' money.

Securities

Bonds and stocks.

Free Trade

The other free trade. International trade in which countries allow goods to flow across their borders without imposing import or export taxes.

Custodian bank

Learn what a custodian bank is.

DMO

The United Kingdom Debt Management Office. It’s an executive agency responsible for managing the government’s debt and cash needs, primarily through issuing gilts and Treasury bills.

Gilt

What is a gilt?

Total Return

This is the measurement of a fund’s performance in a specific period.

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What is a bond?