Markets · 6 pages · 12 min

How a bond is a loan you can sell

A bond is a loan packaged so the lender can sell the claim without the borrower repaying early.

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From the opening

A bond is a loan to an issuer, usually a government or a corporation, written as a security that promises interest and the return of principal at maturity. It is a loan you can sell because the holder can transfer that security to someone else, and the issuer then owes the same promised payments to the new holder. The opening covers the issuer borrows at the first sale, later sales change the lender, and coupons follow the current holder.

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Inside

The issuer borrows at the first sale
Later sales change the lender
Coupons follow the current holder
A bond is debt, not ownership
Where the idea stops applying
A distinction worth keeping

Sources

Bond as transferable debt
Secondary market for bonds

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How a bond is a loan you can sell

From the opening

Inside

Sources

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