Bond Definition | What is a Government Bond

Bond Definition
Bond Definition

The bond definition is a debt security that is used by governments and corporations to raise money by issuing debt. What is a government bond? A government bond is a debt. The government issues a bond to raise money to pay for things it can not through taxation.

Bond Definition

Bonds are debt instruments. Companies sell bonds to investors to raise money to pay for its operations. When bonds are issued the company agrees to pay back the full value plus a coupon (interest payment) at a regular interval or they sell the bonds at a discounted price and agree to pay the bond back in full on a certain date.

What is a Government Bond

A government bond is a debt instrument that is issued by a government body to pay for things such as infrastructure or other investments that it does can not pay for at the time. They use the funds raised by these bonds to pay for roads, trains, or other major investments. They can also be used to pay for any government deficit.

Both government and corporate bonds have coupon payments. Coupon payments require the government or corporation to pay interest rates (usually semi annually) to the bond holder. The organization must also pay back the full value of the bond on the agreed date. If the organization fails to repay either the coupon or the full value of the bond on time they are considered in default. If there is a defaulted bond the holder is entitled to legal action to recoup their investment.

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