Talk:Bond (finance)

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Comments[edit]

Government savings bonds, which have special features and are not normally marketable, are often confused with regular bonds. Government savings bonds tend to be cashable with the principal fully guaranteed by the issuer. These bonds are traditionally sold through banks. There are no coupons. Discounting is not meaningful because both the principal and accrued interest tend to be payable on demand under certain conditions. The bonds are often available at fixed or variable interest rates. The denominations tend to be small. A Canada Savings Bond may be purchased for as little as $100.

Although there are some exceptions, marketable bonds sold through dealers generally have fixed yields. What fluctuates is the market price, which changes the effective yield. A popular denomination is $1,000 although some dealers might have a higher minimum such as $5,000.

MTN[edit]

Could someone write some stuff regarding MTN's.


this is very big topic i cant tell now... — Preceding unsigned comment added by 121.58.175.8 (talk) 18:48, 14 December 2013 (UTC)

Fair Value[edit]

Is the fair value of a bond the Dirty or the Clean price?

Fair Market Value is an equity definition. Debt has a well-known fair value called Present Value. The uncertainty lies in the Future Value which will be affected by changes in interest rates. --JergenJones (talk) 14:16, 8 October 2013 (UTC)

Is there a difference between the par value of a bond and its principal?[edit]

Is there a difference between the par value of a bond and its principal?

To my knowledge, principal is usually not used to refer to a bond. This is probably because the price of bond change, varying redemption value exist for some bonds, and the outstanding balance (principal left unpaid) change in case of an amortized bond.
Par is the amount printed on the bond. Voidvector 00:33, Oct 31, 2004 (UTC)

Actually principal is often used to refer to the amortized amount. So if you have a bond that doesn't amortize, Par=Principal, the principal is always the same as the original face value of the bond. But for bonds that can be paid down: Par stays the same (original face value), principal can be paid down (current face value becomes lower than par). When you carry an amortizing bond (like a capitalized lease, or a car payment) on financial statements, you show it's current value as principal+interest owed. This is NOT the same as the present value of the bond which is (price*.01*principal)+accrued interest. tristanreid

Spreads?[edit]

Can anyone explain what exactly is meant by the phrase "spreads on corporate bonds"? MartinC

Sure, Martin. Here's an answer, then a more thorough explanation:

Brief answer-The spread is the yield on the corporate bond minus the yield on a similar treasury bond. Bond traders don't want to memorize or figure out what an appropriate yield would be when they trade corporate bonds or different maturities and coupons. It's much easier to just say how close the corporate bond is to a similar treasury bond. The difference between the two is called the spread, and is a measure of the credit risk associated with the corporation that issued the bond.

Longer explanation with the details spelled out-The prices of bonds are determined by how much people are willing to pay for them. The reason that not everyone just goes for the bond with the highest yield is that some bonds are more risky than others. Generally this trade-off gives a direct a risk/return relationship, the more risk on the bond, the more it has to yield for people to buy it, so the cheaper it will be to buy it. All bonds are sensitive to interest rates. So if you have a treasury bond you are mainly exposed to interest rate and reinvestment risk. Treasury bonds are generally considered the safest kind of bond, so there is no credit risk. If you invest in a corporate bond that has the same type of characteristics (maturity, coupon) of a treasury bond, you can assume it has the same amount of interest rate and reinvestment risk, plus some amount (a 'spread') of credit risk. Tristanreid 16:04, 19 May 2005 (UTC)

Major changes to the entry[edit]

I’ve made many amendments to this entry. In fact, I have almost rewritten two main paragraphs. Apart from the fact that certain parts were just wrong, vague or only US focussed, my main problem with this article is that it does not differentiate between what is important, and what are details. Certain discriptions, such as that of high yield bonds, were very long, and belong more in a specific entry. Also, all the information about asset backed securities, should not be given in a general bond entry.

Most of the ‘bond’ entry is still just a list of characteristics and classifications. I believe that these should be kept as brief as possible. Instead, more information should be given on how issuance and trading work, who the players are, what the risks are, etc.

I have not changed anything in the second half. Instead of the slightly confusing story that is there now, my suggestion would be to write paragraphs on:

  • Trading (market making, trading conventions, who are involved, etc.)
  • Investors (who buys bonds and why)
  • Credit rating (credit spreads, how do these correspond to the risk perception of investors)
  • Risks (interest rate risk, credit risk, liquidity risk, etc.)
  • Alternatives (instead of the ‘arguments against bonds’, which is slighly POV)

Please let me know what you think.

The page would also benefit greatly from more data – how much bonds were issued, per type etc. At the moment someone who does not know anything about bonds might get the impression that Perpetuals are as common as FRN’s.

In general, the fixed income pages are a bit of a mess (yes, bonds should fall under fixed income). It seems a lot of work to clean it up. Any suggestions?

Phew, my first update in Wikipedia and already such a long story… Apologies.

Payment In Kind Bonds[edit]

What is the proper accounting for this security?

Hey, in the future, try to sign your questions. It's just a wikipedia etiquette thing, no big deal. You can automatically generate a sig by putting 4 tildes in a row. A tilde is the ~ symbol. So to answer your question: How do you mean account? A PIK is a bond where the coupons are paid in either cash or in more bonds (In Kind). If you're wondering how it looks on the financial statements, I'm pretty sure the balance sheet looks the same at first, and each in kind payment increments the marketable securities instead of cash. I don't think there's a difference on the income statement, it probably just goes under interest income, because marketable securities are cash equivalent anyway. Tristanreid 16:15, 13 January 2006 (UTC)

Can an expert talk about bonds that are equity-linked (like the yield depends on the s&p 500 or something) and why they are more and more popular[edit]

Proposed move[edit]

I think people could be meaning a lot of things by the word "bond", so Bond (disambiguation) should be moved here and this article moved to Bond (finance). -- King of Hearts talk 04:00, 28 March 2006 (UTC)

If no one objects by Sunday, April 9, then I'll ask for the pages to be deleted and moved by an admin. -- King of Hearts talk 23:42, 3 April 2006 (UTC)

Merge Debenture with Bond (finance)[edit]

Disagree Debenture has a very specific meaning in the United Kingdom in relation to the issuing of debentures to finance arts and sports venues, and in terms of debenture holders (eg for Wimbledon, Wembley Stadium and the Royal Albert Hall) who get tickets and other privileges (the Google search for debenture ticket gets 85,000 results [1]). This meaning is simply not covered by Bond (finance), and I certainly wouldn't think of looking there for information about it. Humansdorpie 09:05, 28 April 2006 (UTC)

Debenture vs Bonds[edit]

According to the Debenture page, govenments can issue debentures. Can anyone tell me whats the difference between a government issued bond and a government issued debenture? 203.173.143.182 20:13, 18 May 2006 (UTC)

Sure, but this goes to a further question that I was going to ask. According to a law school short textbook defintion, a bond as a general matter is a "secured" debt interest, while a debenture is not. Generally, "secured" means that the lender has recourse to some principal, realty, object, or "res" that he or she can claim an interest in, if not foreclose as in the classic case of realty mortgages or auto loans. How as a practical matter this works for a bondholder, beyond having a priority in the borrower's bankruptcy, is not clear to me.Tom Cod (talk) 06:08, 8 December 2008 (UTC)

Zero coupon[edit]

"Zero coupon bonds do not pay any interest. They trade at a substantial discount from par. The bond holder receives the full principal amount as well as the accrued interest on the maturity date." If they don't pay any interest - what accrued interest ? -- Beardo 04:29, 12 June 2006 (UTC)

They don't pay interest, but they accrue value toward their principal amount. Any time prior to redemption, you can refer to the amount that has accrued thus far as 'accrued interest', or 'accretion value'. It's also not really industry standard to call the final date the 'maturity date'. It's usually called the 'redemption date'. I think referring to the maturity date in the article is an attempt to avoid confusing readers with too much dissimilar jargon, and it's not technically incorrect. I'm changing the article to say "The bond holder receives the full principal amount as well as value that has accrued on the redemption date." If you prefer a different phrasing, please have at it. Tristanreid 23:47, 12 June 2006 (UTC)


Redemption/Maturity date are interchangeable tho' "maturity date" is far more widely used. Note that you should never use the phrase "accrued interest" in the context of a zero coupon bond, there are subtle but important (to a bond trader anyway!) differences in considering a zero-coupon as a "zero coupon bond" or as a "single coupon paid at maturity" bond. The theoretical price of a zero-coupon bond is the net present value of it's redemtion amount, there is no such concept of the "value that has accrued".

Convertible bonds[edit]

Why aren't convertible bonds mentioned in this article?

I added convertible and exchangeable bonds -- Argyn

Auction process and secondary market[edit]

I don't see the description of auction process at both Treasury and the secondary markets. Technical details of bond trading are not covered yet. --Argyn


In the see also section the links to Baby Bonds, Bond Market in India, and Senior Bonds all take you to "article not found" pages in wikipedia. I would delete them myself but am new and not comfortable doing so. Can someone else either delete or fix them? Thanks!

Removed discussion of US Treasury series bond issue dates[edit]

This information was pretty tangential to the general topic of bonds, and was also taken verbatim from the Treasury bonds page. It also upset the flow of the paragraph into which it had been inserted. For these reasons, I removed it. Someone may be interested to note that the intro is still a little garbled - especially in its multiple definitions of the term "bill".

Joachim Heck 20:34, 7 November 2006 (UTC)

Possible error in second paragraph[edit]

It says:

The issuer is equivalent to the borrower, the bond holder to the lender, and the coupon to the interest.

But the way I read it, the bond holder would be the borrower, and the issuer would be the lender. Isn't that right? Or have I misunderstood? Please delete this whole section when resolved either way. —Preceding unsigned comment added by Oidara (talkcontribs) 11:09, 19 December 2007 (UTC)

I believe it's clear. With the commas the way they are, it shows that
  • issuer == borrower
  • bond holder == lender
  • coupon == interest
and this is correct. When a company sells (issues) a bond, it is selling a promise to repay the amount borrowed along with interest. The company receives money from an investor, who now is a bond holder (and who "lent" money to the issuer). Does anyone else think this point should be clarified in the article? -FrankTobia (talk) 14:53, 19 December 2007 (UTC)

Tenor?[edit]

Gee, it would be nice to know what "tenor" means in this context. Is it perchance anything like tenure?

The reason I ask is that I got here on a redirect when I tried to look up tenor upon seeing another article (Duration) use it with no definition and no link. So I find that this article contains zero uses of the word apart from the redirect note I get at the top.

OK, I'll Google it. But it would still be nice to find it here without plowing through every Domingo and Caruso on the WWW. Or, maybe I should just delete that disambiguation reference? Dandrake (talk) 05:17, 22 September 2008 (UTC)

I think Tenor should be added as a seperate article, they arent peculiar to Bonds. Being used in yield curves and Fx forward curves, swaps etc. The notations could use broken dates such as 20140711 or more genrally notations like 3Y, 1W, 3Y3M or even TN (Tomorrow Next) O\N (Overnight) SPOT. All of the non broken dates should really be interpreted relative to a calendar or for an FXrate a pair of calendars. While SPOT also needs to now the settlement period for the instrument eg T+3 instrument. Also you may need to consider exchange times SPOT of T+3 would be different at 15:00 when the market is open and at 21:00 when it is shut. — Preceding unsigned comment added by 141.228.106.147 (talk) 13:51, 11 July 2014 (UTC)

Price relevant only if sale considered[edit]

It would be good to note that pricing a bond is not relevant if the holder plans to hold the bond until maturity. Sure the market price fluctuates but the value of the bond to the bondholder remains constant -- except for reinvestment rate risk. —Preceding unsigned comment added by 67.212.30.238 (talk) 03:45, 20 April 2009 (UTC) However a significant drop in the price could indicate substantial credit risk and hence the risk that the bond may default prior to maturity. —Preceding unsigned comment added by 80.70.48.19 (talk) 09:40, 30 July 2009 (UTC)

Church bonds?[edit]

Any thoughts about adding some information regarding Church bonds? Surv1v4l1st (Talk|Contribs) 01:34, 27 April 2009 (UTC)

Owes the holders a debt, or simply owes money?[edit]

In the intro it says "the authorized issuer owes the holders a debt". Does this really mean that the issuer must at some future time give the holder a debt, such that at that time some third party would then owe the holder money? Or should this simply say "the authorized issuer owes the holders money"? In other contexts, redundancies like "cold temperature" aren't confusing, but in finance the above situation could easily occur, so the wording becomes critical. Thanks. 72.48.98.26 (talk) 05:42, 28 June 2009 (UTC)

New section on History[edit]

We need a new section of this article called 'History' or 'History of Bonds'. —Preceding unsigned comment added by 174.55.220.166 (talk) 00:25, 17 July 2010 (UTC)

UK market[edit]

Complete newbie, failed to find any reference to the way 'bond' is used in the UK (and elsewhere?).

Man in street thinks of it as a term deposit with a bank or building society, not as a marketable security - although man with stockbroker knows it to mean something completely different.

Does this deserve pointing out somewhere, or have I just missed it? 86.150.248.58 (talk) 15:15, 15 January 2012 (UTC)

Bond and loan[edit]

What is the difference between bond and loan ?

Siyac 06:17, 22 September 2012 (UTC) — Preceding unsigned comment added by Siyac (talkcontribs)

Misleading statement about government bonds?[edit]

Second paragraph currently (30 Jan. 2013) states: "in the case of government bonds, to finance current expenditure".

But I believe government-issued bonds can be issued to for debt accrued from previous expenditures: bonds can cover both the current deficit and existing debt (accrued from previous deficits). The page on U.S. Treasuries explicitly discusses Treasury bonds issued in this context.

Proposed edit: "in the case of government bonds, to finance current expenditure and to cover previously accrued debts." — Preceding unsigned comment added by 50.131.141.62 (talk) 18:12, 30 January 2013 (UTC)

Retail Bonds[edit]

I have read a lot of stuff about these new retail bonds, in the Financial Times and CFO insight for instance. I just added a short definition on this page, but I guess it would be interesting and probably content-rich to write a new page on wikipedia about retail bonds. If somebody feels like doing it, please let me know. — Preceding unsigned comment added by AggieKMA (talkcontribs) 13:10, 6 February 2013 (UTC)

Issuance[edit]

On Mar 15th, th following was added: ″The bookrunner is listed first among all underwriters participating in the issuance in the tombstone ads commonly use to announce bonds to the public.″ The second half of the sentence seems a bit unclear, although it looks as if it's meant to express that ″ads are commonly used to announce ...″. Could this be re-phrased or corrected? 213.144.7.145 (talk) 13:50, 18 April 2013 (UTC)

Priority[edit]

I added a sentence in the intro about absolute priority. I believe the topic of repayment priority of creditors and shareholders should have its own page. There currently is only a page on Creditor's rights.