• Fri. Dec 4th, 2020

Definition of Bonds


Oct 23, 2020
Definition of Bonds

A loan with a certain interest from the government that can be bought and sold for debt securities with a maturity (time) of more than one year and with a certain interest rate, is issued by the company to withdraw funds from the public to cover company financing. A stamped document stating that the issuer will repay the principal debt a certain time, and will periodically pay coupons to bondholders; Typically, bonds are bound by a collateral that can be sold to pay claims if the issuer fails to pay the coupon and principal at maturity (bond).

What are Bonds?

Bonds are debt securities issued by an indebted party to an indebted party. In short, bonds are debt securities that can be bought and the buyer will benefit in the form of interest later. In a bond contains the due date of payment of debt and interest. The interest on a bond is called a coupon. Coupons must be given by the bond issuer to bondholders.
In Indonesia, the maturity or term of the bonds is 1 to 10 years. So, bonds are included in medium to long term debt securities. Bonds are listed on the Stock Exchange, such as Shares, Sukuk, Asset Backed Securities, and Real Estate Investments. Apart from the state, bonds can also be issued by companies.

Advantages of Investing in Bonds

Many people choose bonds as a medium for investing. This is because bonds are considered to have a decent profit.

• The profit comes from the difference in the price of the bonds traded.
• Safe because benefits in the form of coupons are guaranteed
• Bond interest is higher than deposits.
• Easily traded on the Stock Exchange and outside the Exchange.
• Can be used as collateral. For example, government bonds.

Types of Bonds

Based on the issuer, there are 3 types of bonds that need to be known.

1. Corporate Bonds. Corporate bonds are debt securities issued by state-owned companies or private companies.
2. Government Bonds. Government bonds are debt securities issued by the government. In Indonesia, this type of bond is issued once a year under the name Retail Government Bonds
3. Municipal Bonds. Regional bonds are debt securities issued by local governments. The goal is to assist local governments in carrying out development.