A bond is a certificate that identifies the terms of a loan made to an some entity with an obligation to pay-back sometime in the future. This promise to pay will show specifics: maturity date, refinancing features (call), a specific interest rate. Bonds are traded on “Over-the-counter” and “Listed” markets places. The securities are normally held at the Depository Trust Company (DTC) and are not delivered to the to the investor or owner, proof of ownership is a confirmation from a broker dealer. Since the interest rate is normally fixed and the maturity date is normally fixed the dollar price (value of the security in terms of 100) is what changes subject to market conditions. Bonds are ideal for the raising of capital and the transfer of risk. Most bonds are rated by various rating agencies like Standard and Poors, Moody, Fitch and others. Since bonds are promises to pay they can be used by many different borrowers.
Types of trading loans are: Corporate Bonds, Treasury Securities, Federal Agency Securities, Municipal Bonds, Money Market Instruments, Mortgage-Backed Securities, Asset-Backed Securities. There are large International and Domestic bond markets.
Bonds can offer investors many more options than stock investments like tax exemptions and tax deferred features. Each bonds has its own risk and reward. Bonds can provide many more options to cover many various investment or speculative objectives. Maturities range from one day to over 50 years. Coupon interest rates can deviate substantially from 0% to higher than 25%. Again the dollar price of the security determines it’s value.
World Bond Market is over $82 Trillion of which the USA entities is responsible for over $34 Trillion.