Markets - Bonds - Basic - Definition - Issuers

http://www.1mtx.com/markets-trades/en/index.php?language=en&menu=MARKETS&punkt=Bond&punkt2=Bonds&index=Basic#BondsBasic Bond: Definition In finance, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon). Other stipulations may also be attached to the bond issue, such as the obligation for the issuer to provide... Bonds Glossary ... certain information to the bond holder, or limitations on the behaviour of the issuer. Bonds are generally issued for a fixed term (the maturity) longer than one year. "A bond is a debt security, similar to an IOU. When you purchase a bond, you are lending money to a government, municipality, corporation, federal agency, or other entity known as the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it "matures," or comes due. In contrast to bondholders who have IOUs from the issuer, shareholders are owners of the company they purchase..." (SEC) Traditionally, the U.S. Treasury uses the word bond only for their issues with a maturity longer than ten years, and calls issues between one and ten year notes. Elsewhere in the market this distinction has disappeared, and both bonds and notes are used irrespective of the maturity. Market participants use bonds normally for large issues offered to a wide public, and notes rather for smaller issues originally sold to a limited number of investors. There are no clear demarcations. Bonds and stocks are both securities, but the difference is that stock holders own a part of the issuing company (have an equity stake), whereas bond holders are in essence lenders to the issuer. Also bonds usually have a defined term, or maturity, after which the bond is redeemed whereas stocks may be outstanding indefinitely. An exception is a consol bond, which is a perpetuity, a bond with no maturity. "The Bond Story" ^ top Sources: SEC; Wikipedia; Yahoo; safehaven.com; .1MTX Bonds: Issuers The range of issuers of bonds is very large. Almost any organization could issue bonds, but the underwriting and legal costs can be prohibitive. Regulations to issue bonds are very strict. Issuers are often classified as follows: Bonds Glossary Supranational agencies such as the European Investment Bank or the Asian Development Bank issue Supranational bonds National Governments issue Government (Domestic) bonds in their own currency. These are often viewed as risk-free bonds because governments can raise taxes, if needed, to pay off the bonds. They also issue sovereign bonds in foreign currencies. Sub-sovereign, provincial, state or local authorities (municipalities) issue Municipal bonds Government sponsored entities. In the U.S., examples include the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Banks. The bonds of these entities are known as Agency bonds, or Agencies. Companies (corporates) issue Corporate bonds Special purpose vehicles are companies set up for the sole purpose of containing assets against which bonds are issued, often called asset-backed securities. Bonds are issued by public authorities, credit institutions, companies and supranational institutions in the primary markets. The most common process of issuing bonds is through underwriting. In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors. Government bonds are typically auctioned. ^ top >Sources: Wikipedia; Yahoo; others;.1MTX