We explain what bonds are, what they are for and the types of bonds that exist. Also, what is bond issuance and some examples.
In the financial area, bonds are called a type of debt instruments used by both private and governmental entities , and that are more or less equivalent to debt securities, or more easily said, are a kind of marketable notes to third parties.
Bonds exist to obtain funds from the financial market . They are issued by some financial entity and placed in the name of the bearer in the market or the stock exchange, where they are traded. The issuer of the bonds receives an amount of capital and undertakes to return it at the end of a fixed term, paying interest to the holder in a fixed or variable income.
This means that every bond also has an associated risk percentage : risk that market interest rates vary and alter the price of the debt security; risk that the issuer will be unable at the end of the term to return the borrowed capital; or risk that at the maturity of the bond, inflation has devalued the purchasing power of the currency so much that the return is imperceptible (there are no gains ).
The connoisseurs of the area talk about the maturity of a bond to refer to the time remaining for its maturity and for the capital to be repaid.
There are the following types of bonuses, according to the game rules that determine them:
The issuance of bonds can be carried out by a private financial organization (companies, banks, etc.) or public (central banks, public companies, etc.), and it is usually of interest to the holders of capital that wish to preserve their assets against the inflation, or simply put them to produce income.
This is largely due to the fact that the bonds have a presumable flow of money , you can know the value they will present at the end of the term. However, bonds do not escape the dynamics of the stock market, and their operating rules are always defined in the contract signed between the issuer and the holder.
A couple of examples of bond financing are:
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