RECENT NEWS  7 hrs ago  Comment 
We will not see a crash in the bond market unless central banks tighten monetary policy very sharply or there is a major spike in inflation The prices of long-term government bonds have been running very high in recent years (that is, their...
MarketWatch  8 hrs ago  Comment 
Weak industrial-production and housing-market data supported the bid in Treasurys ahead of the Fed’s meeting that could clear the way for a rate hike.
The Australian  8 hrs ago  Comment 
FOREIGNERS remain the most enthusiastic buyers of government debt thanks to Australia’s AAA credit rating.
Wall Street Journal  10 hrs ago  Comment 
For a policy so long and so public in the making, the start of government-bond purchases by the European Central Bank last week had a surprisingly big effect.  11 hrs ago  Comment 
Updated from 6:17 a.m. with more on a potential Haversham/BCA Marketplace deal. LONDON (TheDeal) -- European markets continued their upward march this morning, buoyed by continued European Central Bank bond buying and ahead of the U.S. Federal...
The Australian  Mar 16  Comment 
THE US Fed meeting could be a milestone on the path to normalising monetary policy. It might also ignite turmoil in global currency and bond markets.
Wall Street Journal  Mar 16  Comment 
Robert A. Durst—the subject of an HBO documentary detailing his suspected involvement in the deaths of his first wife and a friend—was ordered held without bond Sunday in connection with the latter case.
The Australian  Mar 15  Comment 
AUSTRALIA’S low debt, by world standards, is encouraging foreigners to buy commonwealth government bonds, an RBA official says.
The Hindu Business Line  Mar 15  Comment 
An awareness programme to sensitise graduates and post graduates in accounting and finance about opportunities in bonds, equities and derivatives is in the offing. State Street HCL Servic...
Financial Times  Mar 15  Comment 
Axa, Aberdeen and Schroders conduct stress tests because of liquidity concerns in some bond markets


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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