![]() In this guide, you’ll learn the steps on how to trade bonds with Phillip Securities. The problem that large organizations run into is that they typically need far more money than the average bank can provide. Consider, for example, that lenders often require companies to agree to a variety of limitations, such as not issuing more debt or not making corporate acquisitions until their loans are repaid in full. Secondly, issuing bonds also gives companies significantly greater freedom to operate as they see fit because it releases them from the restrictions that are often attached to bank loans. This is more prevalent during periods of low interest rates, allowing companies to issue bonds with lower coupon rates, thus reducing their interest expenses. Firstly, the interest rate companies pay bond investors is often less than the interest rate they would be required to pay to obtain a bank loan. There are several reasons why borrowers may choose to issue bonds. Bonds provide a solution by allowing many individual investors to assume the role of the lender. Bonds allow individual investors to lend money to such borrowers. Such funds can be used to finance projects and operations, to invest in growth opportunities or to refinance existing debt. Issuing bonds is one way for companies or governments to raise funds. Many corporate and government bonds are publicly traded others are traded only over-the-counter (OTC) or privately between the borrower and lender. When the loan reaches its maturity date, the investor’s loan is repaid.īonds can be bought or sold before they mature, and many are publicly listed and can be traded with a broker. The investor agrees to give the borrower a specific amount of money for a specific period of time in exchangefor periodic interest payments at designated intervals. ![]() ![]() The owners of bonds are debtholders, or creditors, of the issuer. A bond functions as a loan between a bond buyer (lender) and a bond issuer (borrower, typically a corporation or governmental entity).
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