A surety bond is a contract entered into by at least three parties:
Etymology[ edit ] In Englishthe word " bond " relates to the etymology of "bind". In the sense "instrument binding one to pay a sum to another", use of the word "bond" dates from at least the s.
The most common process for issuing bonds is through underwriting. When a bond issue is underwritten, one or more securities firms or banks, forming a syndicatebuy the entire issue of bonds from the issuer and re-sell them to investors.
The security firm takes the risk of being unable to sell on the issue to end investors. Primary issuance is arranged by bookrunners who arrange the bond issue, have direct contact with investors and act as advisers to the bond issuer in terms of timing and price of the bond issue.
The bookrunner is listed first among all underwriters participating in the issuance in the tombstone ads commonly used to announce bonds to the public. In contrast, government bonds are usually issued in an auction.
In some cases, both members of the public and banks may bid for bonds. In other cases, only market makers may bid for bonds. The overall rate of return on the bond depends on both the terms of the bond and the price paid.
In the case of an underwritten bond, the underwriters will charge a fee for underwriting. An alternative process for bond issuance, which is commonly used for smaller issues and avoids this cost, is the private placement bond.
Bonds sold directly to buyers may not be tradeable in the bond market. This was called a tap issue or bond tap. Treasury Bond Nominal, principal, par, or face amount is the amount on which the issuer pays interest, and which, most commonly, has to be repaid at the end of the term.
Some structured bonds can have a redemption amount which is different from the face amount and can be linked to the performance of particular assets.
Maturity[ edit ] The issuer has to repay the nominal amount on the maturity date. As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date.
The length of time until the maturity date is often referred to as the term or tenure or maturity of a bond. The maturity can be any length of time, although debt securities with a term of less than one year are generally designated money market instruments rather than bonds.
Most bonds have a term of up to 30 years. Some bonds have been issued with terms of 50 years or more, and historically there have been some issues with no maturity date irredeemable.
In the market for United States Treasury securities, there are three categories of bond maturities: Coupon[ edit ] The coupon is the interest rate that the issuer pays to the holder. Usually this rate is fixed throughout the life of the bond.
The name "coupon" arose because in the past, paper bond certificates were issued which had coupons attached to them, one for each interest payment.Updated world stock indexes. Get an overview of major world indexes, current values and stock market data.
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Most simply, bonds represent debt obligations – and therefore are a form of borrowing. If a company issues a bond, the money they receive in return is a loan, and must be repaid over time. GOODBYE credit boom, hello insolvency limbo. In June, precision- engineering firm CW Advanced Technologies became the latest issuer to seek a court order to stave off creditors, after its plan to re-tap the bond market to redeem its first series of notes got quashed by poor market sentiment.
China is likely to see the first bond default by a local government this year, as Beijing tightens liquidity as a way of deleveraging an economy facing increasing financial risk, according to S&P.
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Glossary of Bond Terms Glossary of Bond Terms. A| B| C| D| E| F| G| H| I| J| K | L| M| N| O| P| Q | R| S| T| U| V| W| X | Y| Z. accreted value. The current value of a.