What Are Bond Futures? Bond futures are financial derivatives that obligate the contract holder to purchase or sell a bond on a specified date at a predetermined price. A bond futures contract trades on a futures exchange market and is bought or sold through a brokerage firm that offers futures trading. The terms (price and
What Is a Bondholder? A bondholder is an investor or the owner of debt securities that are typically issued by corporations and governments. Bondholders are essentially lending money to the bond issuers. In return, bond investors receive their principal—initial investment—back when the bonds mature. For most bonds, the bondholder also receives periodic interest payments. Key
What Is Bond Laddering? Bond laddering is an investment strategy that involves buying bonds with different maturity dates so that the investor can respond relatively quickly to changes in interest rates. It reduces the reinvestment risk associated with rolling over maturing bonds into similar fixed income products all at once. It also helps manage the
What Is the Bond Market? The bond market—often called the debt market, fixed-income market, or credit market—is the collective name given to all trades and issues of debt securities. Governments typically issue bonds in order to raise capital to pay down debts or fund infrastructural improvements. Publicly traded companies issue bonds when they need to
What Is a Bond Option? A bond option is an option contract in which the underlying asset is a bond. Like all standard option contracts, an investor can take many speculative positions through either bond call or bond put options. In general, all types of options, including bond options, are derivative products that allow investors
What is Bond Power? Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to another, without endorsing the actual bond certificate. Key Takeaways Bond power is a separate legal form that authorizes the transfer of ownership of a registered bond from one party to
What Is a Bond Quote? A bond quote is the last price at which a bond traded, expressed as a percentage of par value and converted to a point scale. Par value is generally set at 100, representing 100% of a bond’s face value of $1,000. For example, if a corporate bond is quoted at
What is a Bond Rating? A bond rating is a way to measure the creditworthiness of a bond, which corresponds to the cost of borrowing for an issuer. These ratings typically assign a letter grade to bonds that indicates their credit quality. Private independent rating services such as Standard & Poor’s, Moody’s Investors Service, and
What Are Bond Rating Agencies? Bond rating agencies are companies that assess the creditworthiness of both debt securities and their issuers. These agencies publish the ratings used by investment professionals to determine the likelihood that the debt will be repaid. Key Takeaways Bond rating agencies are companies that assess the creditworthiness of both debt securities
What Is the Bond Ratio? The bond ratio is a financial ratio that expresses the leverage of a bond issuer by examining the value of bonds outstanding and when they come due. Leverage refers to any borrowed capital, such as debt issued in the form of bonds or other debts. Key Takeaways The bond ratio
