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.

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.

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.

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

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Zero-Sum Game

A situation in which one person's gain is another's loss.
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Quantitative easing

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Running yield

The annual interest payment (dividend) divided by the current market price of a bond.
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Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.
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Over-The-Counter (OTC)

A security that is sold outside of an exchange.
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Professional Client

An investor that is able to meet several regulatory criteria.
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Fundamentals

The data or information that is likely to impact a company's stock price.
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