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A Guide to Financial Bonds

A fiduciary bond is a financial product wherein the guaranteer promises to repay the purchaser the principal, interest or both. Bonds are essentially a loan on the part of the purchaser to some entity. Bonds do not represent any ownership interest in a company however in the event of bankruptcy, bonds take priority over ownership equities like stocks. Because of this bonds are typically considered a lower risk investment.

• Introduction to Savings Bonds

• Savings Bond Information

Bonds can offer numerous features that affect the interest rate, or yield. Bonds that mature (must be repaid) quickly typically offer low risk but also low return. Bonds may also offer options like convertibility; which is the ability to exchange the bond for another asset like a stock. This can offer the safety of a bond but with greater return should a stock perform well. Bonds are typically backed by the full faith and credit of the issuer, so this can be an important factor as well. Their generally low risk makes bonds a common holding in conservative investments.

Type of Bonds

US Treasury Bonds are issued by the Federal Government of the United States, and are backed by the full faith and credit of the United States.

• Individual Series EE Bonds

Commercial Paper is unsecured bonds issued by individual corporations.

• Commercial Paper Rates

Municipal Bonds are issued by regional or state governments to raise money for thinks like roads. Often these are backed by the taxing power of the municipality or tolls from roads made with these funds.

• Municpal Bonds

High yield bonds, also called junk bonds, are issued with high interest rates, as they are not considered investment grade at the time of issue. Countries or corporations with poor credit or extreme current market risk can issue these.

• Junk Bond Fraud

• Defaults on High Yield Bonds

Tax Exempt bonds do not require income tax to be paid on the gain. These can be useful for individuals who typically would have to pay a high tax rate on any gains.

• Introduction to take exempt bonds

Bonds as an Investment

Bonds are typically included in conservative investment portfolios where a primary concern is the conservation of capital. Other financial products such as money market accounts, CDs, and the investment portfolio of many types of insurance and annuity products are invested in a variety of bonds. High yield bonds would not typically make up a large part of a conservative portfolio given their higher risk exposure. Instead these would be more typically to a growth portfolio.

• Treasury Bond Yield Curve

• Corporate Bond Liquidity

• Investment vs Low Grade Bonds

• Federal Deposit Insurance Corporation

• Basic Investment Concepts

• Personal Loans

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