A Bond is like a loan, the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments or in the case of Government bonds to finance current expenditure. Bonds must be repaid at fixed intervals over a period of time.

Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders have a creditor stake in the company (i.e., they are lenders). Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. 

Bond market (also known as the debt, credit, or fixed income market) is a financial market where participants buy and sell debt securities, usually in the form of bonds.

Because of the interest rate risk, bonds with longer terms are more risky than bonds with shorter terms. If you plan to trade bonds, be sure you understand the interest rate risks involved and how holding long-term bonds increases that risk.


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