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U.S. fund manager OppenheimerFunds, the largest holder of Puerto Rico debt among U.S. municipal bond funds, warned the island it stands ready to defend the terms of bonds it holds, a day after the governor said he wanted to restructure debt and...
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Treasury yields turned lower on Tuesday, as the market resumed a flight-to-safety rally sparked by fears of a Greek collapse.
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Trading in a number of Greek government bonds and other Greek-issued securities have been blocked Tuesday by electronic trading platform Tradeweb. The move came at the request received by the U.K. Financial Conduct Authority, Tradeweb said....
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Public pensions have recently turned into the biggest headache for municipal bond investors, as cities are issuing risky bonds to fund their pensions.
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Tradeweb Markets, the leading global marketplace for electronic fixed income, derivatives and ETF trading, announced its actionable axes have significantly improved institutional investors’ access to high quality liquidity for European...
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A new exchange-listed bond index fund issued by Amundi has been available in Deutsche Börse’s XTF segment since Tuesday. The ETF is tradable via Xetra and Börse Frankfurt. Name: Amundi ETF Floating Rate USD Corporate UCITS ETF Asset...
BBC News  Jun 30  Comment 
Shares in struggling Japanese electronics giant Sony fall more than 8% after it announces plans to raise $3.6bn through a sale of shares and bonds.
Reuters  Jun 30  Comment 
* Completes the financing of the acquisition of IGATE with the successful placement of bonds for a total amount of 2.75 billion euros ($3.08 billion)




 
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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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