investing

A bond refers to a debt security that pledges to make regular payments for a specified period of time. If you are wondering what a security is, it is a claim or entitlement on the issuer’s future assets or income. If you buy a bond, you are simply lending money in return for interest payments which the borrower or bond issuer makes periodically during the loan term. At the time of loan maturity, the bond issuer pays the principal or original amount of the debt to the lender or bond holder. When to pay the periodic payments of the interest and the date of maturity are based on the terms of the bonds agreed upon by both holder and issuer. Bonds are commonly issued by governments and corporations. They do so to raise capital so they can finance their projects or business expansions.  The major bond classifications include the US Treasuries, corporate bonds, municipal bonds, and agency bonds. US Treasuries are those issued by the US Department of Treasury while corporate bonds are offered by corporations that have investment grade ratings. Local governments like states and cities can also issue municipal bonds. Government-sponsored enterprises like Freddie Mac and Fannie Mae can also offer agency bonds. Aside from these, there are also high-yield bonds, asset-backed securities, mortgage-backed securities, and collateralized debt obligations (CDO).