Rather than borrowing from a bank, large companies, banks and sovereign governments borrow money in the capital markets by issuing bonds. A bond is a security representing debt of an issuer. Bond buyers are the lenders; bond issuers owe lenders money and pay periodic interest to them. Interest payments a.k.a. coupons, are expressed as a percentage of the money borrowed. Key determinants of bond value are coupon, price and yield.
Key learning objectives:
What is a bond?
Why invest in Bonds?
Bond prices, cashflows and values
Yields, yield-to-maturity and the yield curve