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Financial Trading Definitions Bond / Bond Market
Financial Trading Definitions Bond / Bond Market | Bond / Bond Market |
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The bonds market is a mechanism that enables organisations like companies or governments to borrow money for their business needs (eg, projects, and expansions). A bond (also known as a debt security) is basically a loan agreement. The organisation which needs money issues a bond, and whoever buys the bond is essentially lending money to the organisation.
The seller or issuer of the bond (ie, the organisation borrowing money) agrees to repay the loan amount after a specified time and with interest (known as a coupon). The prices of bonds depend on many factors, including interest rates. Bond prices generally go up when interest rates go down, and vice versa, and there are many people who seek to profit from changes in interest rates by trading bonds.
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