Bonds in circulation

There are many types of bonds that are issued by different institutions, but all operate with the same basic principle, the issuer takes the debt, and the person who buys it is the holder of the bond. In return for these funds, the issuer pays the fixed interest during regular periods until the bond maturity date.

In our article today we will learn about the concept of Bonds in circulation , the source from which they come, as well as their main types and concepts.

Concept of bonds

Bonds in circulation are classified as a type of debt. In other words, they provide a promise of payment that the issuer of the bond will provide to the bondholder on pre-set terms of issuance. The issuer of the bond bears the debt. The person purchasing the debt is the bondholder who provides the money for fixed interest and pays it until the bond is due.

Bond issuers can then use those funds to finance any spending plan they wish to apply. In return, they pay fixed interest on debt during fixed and regular periods during the bond’s lifetime, and at the end of the debt period, the bonds are said to have been owed, at which point the issuer repays the principal amount of the debt.

Issuers of bonds

The market in which buyers’ new debt is issued is called the main bond market, but it includes only part of the entire bond market, where the bond market contains a secondary market, in which pre-issued bonds are traded between buyers and sellers in the form of debt notes, and the bond market is broad, and it far exceeds the stock market in value.

Governments are the largest bond issuers, issuing long-term government bonds to help finance expenditures needed to support their countries, and other major bond issuers include banks and companies.

Basic concepts of bonds

Generally, bonds are not the only type of debt, as they tend to have terms that are longer than other debt bonds, so before we get to know the main types of bonds, let’s look at some of the basic concepts of bonds:

1. Nominal Value

This is the amount of debt taken by the source, for which interest is paid on the holder.

Date of maturity

The maturity date determines when the bond holder’s capital must be paid.

3-Coupon

This is the interest rate that the issuer pays to the bondholder.

4. Return

It measures the rate of return an investor .will receive from the bond and is calculated in more ways than one, which is the amount of the annual interest divided by the prevailing market rate of the bond.

5. Current market price

The bond price may vary and fluctuate during its tenure and its trading in the secondary market.

Main Bond Types

Now we will introduce you to the four main types of investment bonds:

1. Corporate Bonds (Short Term Bonds)

Companies can raise funds through .two main methods: floating stocks or issuing debts in the form of bonds to these companies.

There are many reasons why they want to. raise their funds through such means, including acquisitions, mergers, and financing of expansion costs.

Capital increases also come with a cost, and in the case of equities, these companies give up a share of voting rights and distribute profits, while with debt .they bear interest costs, while they may issue debts with a range of benefits, corporate bonds directly refer to companies’ debts.

Government bonds (medium and long-term bonds)

These bonds are one of the types of sovereign bonds, usually medium .or long-term, in a period that may be of a few years or contracts.

Key government bonds contain futures contracts. traded on the exchange, making them an easy type of bond to trade for individuals.

Some of the main types of government bonds are:

US Treasury T-Bonds

US Treasury Notes T-Notes

German bonds Bunds

German bonds Schatz

UK Gilts Bonds

Italian government bonds BTP

Municipal bonds

They are a type of semi-sovereign bond, where debt papers issued by a local government entity or agency are called municipal bonds.

The municipal bond market is large, valued at several .trillion United States dollars, and interest on debt is usually exempt from federal tax and sometimes from state tax.

Supranational bonds

They are forms of long-term debt that transcend a country’s borders and are very similar to government bonds, as they tend to have a high credit rating.

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