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Finance Asia  2 hrs ago  Comment 
The Chinese property developer launches a $900 million bond for refinancing purposes, breaking the Chinese New Year dollar supply drought.
Finance Asia  2 hrs ago  Comment 
The Chinese property developer launches a $900 million bond for refinancing purposes, breaking the Chinese New Year dollar supply drought.
Wall Street Journal  6 hrs ago  Comment 
The Mexican government sold €2.5 billion in nine-year and 30-year bonds Thursday, securing record low yields for the maturities and completing most of its international capital markets financing needs for 2015.
MarketWatch  7 hrs ago  Comment 
An auction of $29 billion in seven-year bonds generated lackluster demand from investors. The yield on the newly auctioned seven-year notes was 1.834%, 1.1 basis points higher than the seven-year yield the minute before the auction. Indirect...
Wall Street Journal  8 hrs ago  Comment 
Deutsche Bank and J.P. Morgan suspended plans for a sale of of Argentine government debt in London, delivering a fresh setback to the cash-strapped South American nation amid a long-running feud with creditors.
Reuters  8 hrs ago  Comment 
LONDON, Feb 26 (IFR) - Abengoa is gearing up to issue a US$300m exchangeable bond, which will be the firm's first attempt to tap the public debt markets since the steep sell-off in its bonds late...
The Hindu Business Line  Feb 26  Comment 
German seven-year bond yields fell below zero for the first time ever on Thursday, as investors positioned themselves for an extended era of cheap money ahead of the European Central Bank’s loomin...
Wall Street Journal  Feb 26  Comment 
Government bonds across the eurozone soared to record levels as investors anticipated the start of the ECB’s bond-buying program, which comes at a time when high-rated eurozone debt is in short supply.
Financial Times  Feb 26  Comment 
European bond yields slide to record lows
Yahoo  Feb 26  Comment 
German seven-year bond yields fell below zero for the first time ever on Thursday, as investors positioned themselves for an extended era of cheap money ahead of the European Central Bank's looming bond-buying scheme. Central banks' battle to keep...




 
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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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