SECURITIES IN DETAIL

GUIDE TO BONDS

Bonds are traded on the "bond market" which is also known as the "fixed income, debt & credit market".
     Investors buy and sell debt securities, generally in the form of bonds. A bond is basically a loan by the investor, to the borrower, who agrees to repay the load at a certain date as well as paying yearly interest. Bonds are issued by public authorities, credit organizations, companies & superannuation institutions.     
The maturation of bonds range from one year to 100's of years and are divided into three classifications.
"Long term bonds" have a maturation period of over 10 years (some can have no maturity period at all).
     "Medium term bonds" are called "notes" and have a maturation period of between one and ten years and short term bonds which mature within a year are known as "bills".
     The interest payable on a bond is called a "coupon" and is generally payable in two yearly instalments. Some bonds pay no interest & are sold well below their face value, known as "junk Bonds" they carry a higher risk but can offer a high reward. The majority of bonds are purchased by banking institutions, pension funds & insurance companies although the ownership of bonds by private individuals is more popular in America. The bond market traditionally rises as the stock market falls and has more short term stability.