Bonds are fixed-income securities issued by banks, mortgage banks, governments, corporations, and other entities to raise capital. Unlike shares, investing in bonds does not provide you with ownership in the company. When you invest in bonds, you lend money to a bank, corporation, or government for a specified period and receive interest payments in return. From an investor's perspective, bonds are debt securities that offer a medium to long-term investment horizon. The redemption of the bond is 100 % of the nominal amount at the end of the term.

The bond issuer, such as a government, bank, or corporation, is responsible for issuing the bonds. Bonds are a debt instrument from the issuer's perspective. The issuer borrows a certain amount of money and agrees to repay the borrowed amount and make regular interest payments. The creditworthiness of the issuer is crucial to the security of the bond, as changes in creditworthiness or insolvency could impact the bond's value.

Bonds can have different types of interest, which are called coupons. Fixed-rate bonds offer a fixed interest rate over the entire term, while floating-rate bonds are linked to a reference interest rate and are regularly adjusted to the new interest rate level. Coupons are paid on the coupon date and are calculated based on the nominal amount. Zero-coupon bonds are another type of bond that do not pay a regular coupon, and the yield on such bonds is the difference between the initial issue price and the redemption price at the end of the bond's term.

Changes in market interest rates can cause fluctuations in bond prices. Rising market interest rates can cause bond prices to fall and falling market interest rates can cause bond prices to rise, resulting in interest rate risk. Bonds can also be issued in foreign currencies, which creates an additional currency risk between the local currency and the bond currency.
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