Bond

A bond is a debt security.

The bond issuer undertakes that the bond nominal value, that interest rate and repays its commissions to the current owner of the policy at the specified time and in the manner indicated. The bond buyer is the investor who, by purchasing the bond, provides a loan under the advertised conditions of the bond issuer. 

The bond of registered securities, i.e. the owner must prove himself in order to assert his rights arising from the bond. This dematerialized securities is realized automatically by registering the bonds in a securities account.

One of the most important selection criteria for the investor is the rate of interest offered by the bond. Bonds can be fix obsession they have variable interest rates. In the case of so-called zero-coupon or discount bonds, the issue is made below the nominal value, and the bond's interest is the difference between the issue price and the nominal value repaid at maturity. The bond can pay interest at a predetermined regularity (for example, every six months, annually) a term during, but also in one sum at maturity. At the end of the term, i.e. when the bond expires, the issuer of the bond always repays the face value of the bond, as well as the interest due.

For the investor, the most important risk of buying a bond is the creditworthiness of the issuer. Bonds can be issued not only by businesses, but also, for example, by the state itself. It is a financial principle that the safest investment in a given country is bonds issued by the state (treasury bonds, government bonds) are reported. 

The credit risk rating of corporate bonds is carried out by credit rating agencies. Among them, the largest and best known are Standard & Poor's, Moody's and Fitch Ratings. Credit rating agencies classify bonds into different risk groups. Bonds with a rating of BAA (Moody's) or BBB (S&P, Fitch) or better belong to the category recommended for investment, but of course there are bonds with a significantly worse risk rating (junk bond) also. Before buying a bond, it is worth finding out what the specific bond is like credit qualification.

You can buy bonds with a securities account at investment companies that distribute securities (banks, brokerage firms). Bonds are bought or sold on the bond day exchange rate is happening. The price of bonds is strongly influenced by the current market interest rate: in a rising interest rate environment, for example, the price of a fixed-rate bond previously issued at a lower interest rate will decrease.