Bond

Bond/note - issue-grade debt security, fixing its holder right to receive its nominal cost (or another material equivalent) in the fixed term from the obligor. Bond income is paid in a form of interest and/or discount. Bonds are the source of extra revenue for the obligor. More often their issue has a purposive character, for special programs or objects financing, income from which serves as bond income payment in the future.

Economic purpose of bonds is close to lending, but does not require securitization and simplifies the procedure of debt transfer to another creditor. Usually bond income is higher, than the income received from investing in bank deposit.

Bond types.

Due to the income type

Zero Coupon Bond is sold at the price lower than its nominal cost. The closer bond's repayment date, the higher its market price is. For example, T-Bills.

Fixed Rate Bond is a coupon bond, income from which is paid under fixed rate coupons. Information about the coupon is mentioned in issue prospectus.

For example, federal loan bond, sovereign bond, most of Eurobonds.

Floating Rate Note (FRN; Floater) is a coupon bond with the variable coupon, the size of which is attached to some macroeconomic indicators: government bonds return, interbank loan rate (LIBOR, EURIBOR, MOSPRIME).

Due to the issues body

Government bonds - is a bond, issued by the government or municipals (but obligatory government guaranteed) to cover the budget gap.

Sovereign bonds.

Corporate bonds.

Municipal bonds.