Bond Security

A Bond Security is a loan (with a bond interest rate issued by a bond issuer) that is a financial security.

• AKA: Financial Bond.
• Context:
  • It can range from being a Tradable Bond to being a Non-Tradable Bond.
  • It can range from being an Investment-Grade Bond to being a Junk Bond.
  • It can be sold by a Bond Seller (who is offering to pay the buyer interest - in exchange for money).
  • It can be bought by a Bond Buyer (often in a bond market).
  • It can range from being a Callable Bond to being ...
• Example(s):
  • a Government Bond.
  • a Company Bond.
  • a Private Placement Bond.
  • …
• Counter-Example(s):
  • a Friendly Loan.
  • an Equity Security.
  • an Insurance Bond.
• See: Security (Finance), Return on Investment, [[Bond Credit Rating], Coupon (Bond), Maturity (Finance), IOU, Certificate of Deposit, Commercial Paper, Money Market, Stock Security.

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References

2016

• (City Council of Barnstable, 2016b) ⇒ Town of Barnstable. (2016). “Town of Barnstable Adopted Operating Budget - 2017."
  • QUOTE: Bond: A means to raise money through the issuance of debt. A bond issuer/borrower promises in writing to repay a specified sum of money, alternately referred to as face value, par value or bond principal, to the buyer of the bond on a specified future date (maturity date), together with periodic interest at a specified rate. The term of a bond is always greater that one year. (See Note).

2014

• (Wikipedia, 2014) ⇒ http://en.wikipedia.org/wiki/bond_(finance) Retrieved:2014-8-5.
  • In finance, a bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity date. Interest is usually payable at fixed intervals (semiannual, annual, sometimes monthly). Very often the bond is negotiable, i.e. the ownership of the instrument can be transferred in the secondary market. This means that once the transfer agents at the bank medallion stamp the bond, it is highly liquid on the second market. Thus a bond is a form of loan or IOU (sounded "I owe you"): the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Certificates of deposit (CDs) or short term commercial paper are considered to be money market instruments and not bonds: the main difference is in the length of the term of the instrument. Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e. they are investors), whereas bondholders have a creditor stake in the company (i.e. they are lenders). Being a creditor, bondholders have absolute priority and will be repaid before stockholders (who are owners) in the event of bankruptcy. Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks are typically outstanding indefinitely. An exception is an irredeemable bond, such as Consols, which is a perpetuity, i.e. a bond with no maturity.

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