Understanding Bonds – The term bond is indeed very rarely used in everyday talks, so most ordinary people certainly do not know what the word bond means. Bonds are usually only understood by people engaged in financial markets or capital markets.
So what are the bonds?
Definition and Definition of Bonds
Bonds are one type of securities that can provide benefits to the holders. Bonds are usually issued by companies that require additional capital from outside parties (external parties).
If interpreted in full, the definition of bonds is a letter of proof of debt issued by a company that lacks capital. This letter will later be given to the lenders as proof of the provision of debt as well as the media to claim the service of providing debt (for information, bond issuers usually provide remuneration to bondholders with the interest system set at the time of bond issuance).
Types of Bonds in the Capital Market
Registered Bonds and Performance Bonds
Registered bonds – are bonds issued using the name of the owner or the name of the holder.
Performance bonds – are bond bonds whose names are not listed, so that they can be traded or transferred to others without the need for any official / documentation activities.
Futures Bonds, Serial Bonds and Bonds Can Be Redeemed
Futures bonds – are bond bonds whose validity period is set at a certain time (not gradually).
Serial bonds – are bonds whose maturity date is set serially or gradually.
Bonds can be redeemed – are bonds that can be redeemed by the issuer whenever the publisher wants to redeem it, as long as it is done before the due date.
Guaranteed Bonds and Unsecured Bonds
Guaranteed bonds – are bonds that are guaranteed in the form of company assets. This guarantee is intended to guarantee the return of bondholders when the company experiences colaps / out of business at any time. One example of this type of bond is a trust bond, which is a bond guaranteed by using shares of another company.
Bonds are not guaranteed – are bonds that are not guaranteed anything at all. When compared to guaranteed bond models, this bond model tends to be far more risky for its holders. However, when compared to guaranteed bond models, the rate of return or interest rates on bonds is not guaranteed to be much higher.
Convertible bonds are bonds that can be converted or replaced with other securities after the bonds are issued. In practice, usually (majority) convertible bonds are converted into shares.
So you already know what bonds are ? Hopefully useful!