In finance, a bond is a debt security, in which the issuer owes the holders a debt and is gratified to repay the principal and interest at a later date, termed maturity. Other provisions may also be attached to the bond issue, such as the obligation for the issuer to offer certain information to the bond holder, or limitations on the behavior of the issuer. Bonds are generally issued for a fixed term longer than ten years. U.S Treasury securities issued debt with life of ten years or more is a bond. New debt between one year and ten years is a note, and new debt less than a year is a bill.
A bond is simply a loan, but in the form of a security, although terminology used is rather different. The issuer is equivalent to the borrower, the bond holder to the lender, and the coupon to the interest. Bonds enable the issuer to finance long-term investments with external funds. Debt securities with a maturity shorter than one year are typically bills. Certificates of deposit or commercial paper are measured money market instruments.
