Types of Bonds
“Think of bonds as you would a loan. Your brother-in-law
may not be very good at paying back loans, so if you were
going to lend him $10,000 for five years, you’d ask
him to pay more interest than if he had a great repayment
history.”
- Lorayne Fiorillo, author of
Financial Fitness in 45 Days
Bonds vary according to issuer, maturity, and credit quality.
Issuers may vary from state or local governments to public
companies, maturity dates range from 1 to 10 years, and credit
quality spans the gamut from U.S. government guarantees to
what’s called “junk bonds”--those with lower
credit ratings.
The key attribute of bonds is income which is usually paid
semi-annually. While bond prices can fluctuate from day to
day, the income stream they provide may be very attractive
for long-term investors. Bond prices typically move in the
opposite direction of interest rates; therefore when interest
rates rise, bond prices drop. And vice versa.
The following links are designed to help familiarize you
with the various types of bonds available in today’s
market.
U.S. Government Securities
Mortgage-Backed Securities
Municipal Bonds
Corporate Bonds
Junk Bonds
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