Bonds are a kind of loan you offer to its issuer upon which you get interest. When the bond reaches maturity, the issuer returns your money, along with the interest. Bonds are considered fixed-income investments, as they provide a regular stream of income in the form of interest payments. They are widely used by governments, municipalities, and corporations to raise capital for various purposes.
The rapid rise in interest rates in recent months has shaken investors and cast a cloud over the economy. Bond prices are inversely related to interest rates. When interest rates rise, bond prices tend to fall, and vice versa. This relationship exists because as interest rates increase, newly issued bonds offer higher coupon rates, making existing bonds with lower coupon rates less attractive.
A bond is a fixed-income financial instrument that represents a loan made by an investor to a borrower. A bond contract details the loan amount, interest rate, maturity date, and other terms and conditions. Bonds are generally considered safer investments compared to stocks because they offer a predetermined return and have a fixed maturity date.