Bonds are debt securities issued by governments, municipalities, or corporations to raise capital. When you buy a bond, you’re essentially lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at the bond’s maturity. Bonds are considered fixed-income investments because they typically pay a fixed interest rate.
Investors buy bonds as a way to receive steady income and preserve capital. The value of a bond can fluctuate based on changes in interest rates and the issuer’s creditworthiness. Bond markets are an integral part of the broader financial system, providing a means for entities to borrow funds and investors to generate income.