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Motley Fool  7 hrs ago  Comment 
Higher expectations = lower prices.
newratings.com  May 6  Comment 
WASHINGTON (dpa-AFX) - After failing to sustain an initial upward move, treasuries turned lower over the course of the trading session on Friday. Bond prices pulled back well off their early highs and saw further downside in afternoon trading....
Benzinga  May 6  Comment 
Rebounding commodities prices and a weaker dollar have been cited as driving factors for several well-known asset classes and sectors this year. Previously downtrodden emerging markets currencies are soaring this year with plenty of help from the...
Benzinga  May 6  Comment 
Bloomberg reported on Thursday that the largest exchange traded fund that holds junk bond assets is under heavy selling pressure. The iShares iBoxx $ High Yid Corp Bond (ETF) (NYSE: HYG) has seen $2.6 billion in outflows over the past four days...
The Times of India  May 6  Comment 
New Delhi, May 6 () Government should issue tax-free bonds and arrange funds from multilateral agencies like ADB to provide long-term finance to hydro projects, a Parliamentary panel has said. "Tax-free bonds, similar to the infrastructure sector,...
Automotive World  May 6  Comment 
Volvo Cars, the premium car maker, has announced it is seeking to raise €500m from a bond issue, its first foray into the global corporate bond markets in its 89 year history. The Swedish company will begin a roadshow for potential investors on...
Benzinga  May 6  Comment 
Arguably the biggest source of controversy surrounding high-yield bond exchange-traded funds has been the ability of these products to remain sufficiently liquid during times of elevated market duress. With size and liquidity being important...
Reuters  May 6  Comment 
An Italian prosecutor is investigating Deutsche Bank over its sale of 7 billion euros ($8 billion) of Italian government bonds five years ago, an investigative source told Reuters.
MarketWatch  May 6  Comment 
Shares in Asia edged lower on Friday, amid caution before a key U.S. jobs report and shaky oil prices.




 
TOP CONTRIBUTORS

A bond is a type of debt. It's a loan from an investor to an institution, and in exchange the investor collects a predetermined interest rate. When a company needs capital to expand its business, it issues bonds to the public. Investors buy them with the understanding that they will collect the original principal plus interest when the bond matures at a set date. Federal, state, and municipal governments issue bonds for a similar purpose, to raise money for projects and public programs.


Types of Bonds

Bonds or Stocks?

Making the choice between stocks and bonds can be complex. In general, though, the key consideration is your own planning horizon.

Bonds are, in general, more predictable than stocks, and (on average and in general) give you lower returns. If you believe you'll need predictable access to money over, say, a 20-year period, you may be better off with bonds. For example, if you want to put aside a specific amount of money for a grandchild, expecting that money to be available for college in eighteen years, and not expecting to have other capital available. Insurance companies invest heavily in bonds for just this reason: it matches predictable liabilities (future insurance claims) against predictable cash flows (principal and interest).

Some bonds have tax advantages; for example, municipal bonds are typically exempt from state taxes in the state that issued them, as well as federal taxes. This can make them more attractive, though often you will find that the market has arbitraged away the difference, and that corporate (that is, taxable) bonds carry a higher gross yield -- and the same net yield after taxes. Although many investors invest in munis for just this reason -- they "don't like the taxman" -- they may not be making the optimum investment choice.

Bonds are not riskless, however. They carry credit risk ("will I get my money back?"), prepayment risk, liquidity risk and interest-rate risk. Many bonds give the bond issuer the right to repay the bond early -- which happens more often when rates are low, in other words, just when you don't want your money back. This is prepayment risk. Liquidity risk is the risk that you won't find a good price for your bond when you want to sell it -- because there are so many more bond issuers than stock issuers, and because bonds are not exchange-traded, there may not be a willing buyer. Interest-rate risk is the opposite of prepayment risk: when rates go up, the value of your bond will drop (it drops more, the further away it is from maturity). If your circumstances change and you need to sell the bond before maturity, you can lose capital that you would otherwise receive, if you held the bond to maturity.

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A how to on investing in bonds

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