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Bond

What is a bond?

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

Leverage

A method of trading using borrowed money that usually involves a very high level of risk.

index-linked gilts

Gilts where the dividends and principal repayments are related to movements in the Retail Prices Index (RPI). This is as opposed to a conventional gilt, where the dividends and principal repayments are fixed in nominal terms.

Wall Street

A street in New York that became a figure of speech for the financial markets of the US.

S&P 500

Find out what is the definition of the S&P 500 index.

Clean price

The quoted price of a gilt, which excludes accrued interest

Capital

Learn what financial capital means

Junk Bond

A form of debt investment that carries higher risk because of the likelihood that the issuer will default.

Professional Client

An investor that is able to meet several regulatory criteria.

Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.

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