Types of Bonds
TYPES OF BONDS
There are a plenty amount of different types of bonds, existing nowadays. Actually, the bond market offers investors a lot more choices than the stock market. Which bonds to choose depends on the goals, tax situation and the risk tolerance of a person who is going to invest in bonds. The broad bond market includes in itself government, municipal, corporate, mortgage-backed or asset-backed securities and international bonds. Within each broad bond market sector it is possible to find securities with different issuers, credit ratings, coupon rates, maturities, yields and other features. Each one offers its own balance of risk and reward. In more details:
Government Bonds - fixed-income securities are classified according to the length of time before maturity. These are the three main categories:
Bills - debt securities maturing in less than one year.
Notes - debt securities maturing in one to 10 years.
Bonds - debt securities maturing in more than 10 years.
For example, marketable securities from the U.S. government - known collectively as Treasuries - follow this guideline and are issued as Treasury bonds, Treasury notes and Treasury bills (T-bills). Technically speaking, T-bills aren't bonds because of their short maturity. All debt issued by Uncle Sam is regarded as extremely safe, as is the debt of any stable country. The debt of many developing countries, however, does carry substantial risk. Like companies, countries can default on payments.
Municipal Bonds
Municipal bonds, known as “munis”, are the next progression in terms of risk. Municipal bonds are debt obligations issued by states, cities, counties and other governmental entities, which use the money to build schools, highways, hospitals, sewer systems, and many other projects for the public good.
Corporate Bonds
Corporate bonds (also called corporates) are debt obligations, or IOUs, issued by private and public corporations. They are typically issued in multiples of $1,000
There are a plenty amount of different types of bonds, existing nowadays. Actually, the bond market offers investors a lot more choices than the stock market. Which bonds to choose depends on the goals, tax situation and the risk tolerance of a person who is going to invest in bonds. The broad bond market includes in itself government, municipal, corporate, mortgage-backed or asset-backed securities and international bonds. Within each broad bond market sector it is possible to find securities with different issuers, credit ratings, coupon rates, maturities, yields and other features. Each one offers its own balance of risk and reward. In more details:
Government Bonds - fixed-income securities are classified according to the length of time before maturity. These are the three main categories:
Bills - debt securities maturing in less than one year.
Notes - debt securities maturing in one to 10 years.
Bonds - debt securities maturing in more than 10 years.
For example, marketable securities from the U.S. government - known collectively as Treasuries - follow this guideline and are issued as Treasury bonds, Treasury notes and Treasury bills (T-bills). Technically speaking, T-bills aren't bonds because of their short maturity. All debt issued by Uncle Sam is regarded as extremely safe, as is the debt of any stable country. The debt of many developing countries, however, does carry substantial risk. Like companies, countries can default on payments.
Municipal Bonds
Municipal bonds, known as “munis”, are the next progression in terms of risk. Municipal bonds are debt obligations issued by states, cities, counties and other governmental entities, which use the money to build schools, highways, hospitals, sewer systems, and many other projects for the public good.
Corporate Bonds
Corporate bonds (also called corporates) are debt obligations, or IOUs, issued by private and public corporations. They are typically issued in multiples of $1,000