Bond
A fixed-income debt instrument where an investor loans money to an entity for a defined period at a fixed interest rate.
Definition
A bond is a fixed-income instrument representing a loan made by an investor to a borrower (typically a corporation or government). The borrower agrees to pay periodic interest (coupon) and return the principal (face value) at maturity. Key bond characteristics include face value (typically $1,000), coupon rate, maturity date, and credit rating. Government bonds (Treasuries) are considered the safest, while corporate bonds offer higher yields with more risk. Bond prices move inversely to interest rates — when rates rise, existing bond prices fall. Bonds are rated by agencies like Moody's and S&P, from AAA (highest quality) to D (default). They provide portfolio diversification and income.
Related Terms
Yield
The income return on an investment, expressed as a percentage of the investment's cost or current value.
EconomyInterest Rate
The percentage charged by a lender or paid by a borrower for the use of money over a period of time.
InvestingTreasury Bond
A long-term US government debt security with a maturity of 10 to 30 years.