Bonds

What are they?

Bonds are debt instruments issued by entities like governments, companies, or international organizations. They’re basically a way for these entities to raise money — the issuer gets a loan from investors who buy the bonds, and in return, they agree to pay back the original amount (called the principal) on a specific date (known as the maturity date), plus interest along the way.

Put simply, when you buy a bond, you’re acting like a lender. And in return, the issuer offers you:

Regular interest payments: These are called coupons, and they’re your return for lending the money.
Repayment of the principal: The amount you originally invested gets paid back when the bond matures.

There are a bunch of different types of bonds depending on who’s issuing them, how long they last, and how they’re structured:

• Government bonds: Issued by governments to fund projects or cover budget gaps. These are usually seen as low-risk — especially if the country has a stable economy.
• Corporate bonds: Issued by companies to fund operations or expansion. They tend to offer higher returns than government bonds, but also come with more risk.
• International bonds: Issued in foreign markets or in a different currency than the issuer’s.
• High-yield bonds: These offer higher interest rates because they carry more credit risk (i.e., there’s a bigger chance the issuer might not pay you back).