Bond Market
A bond is basically a written pledge to repay a specified amount of money with interest. Basically, when you buy or invest in a bond, you are giving a company a loan, with a set date that the bond will mature, or end, and you will be repaid the money as well as some interest.
Bonds yield higher interest rates than certificates of deposit that you may see at your local bank or credit union. The legal conditions of a bond are called the bond indenture. This details all of the conditions related to the bond.
Trustees are financially independent firms that act as the bondholders' representative, because bond indentures can be heavily worded with legal language that is hard to understand. Corporations will sell bonds for the same reasons regular people borrow money. They don't have enough to pay for major purchases, they want to finance ongoing business activity, or it is difficult or impossible for them to sell stock. We should now talk about the types of bonds that are available.
Debentures, mortgage bonds or secured bonds, subordinate debentures, and convertible bonds are just to name a few. If you hold a debenture, there is the possibility you may not be repaid on time (because of bankruptcy or or problems) however you will have the right to act as a creditor. A mortgage or secured bond is backed by a company's assets.
continue to Bond Market Part 2