bond

bond, in finance, usually a formal certificate of indebtedness issued in writing by governments or business corporations in return for loans. It bears interest and promises to pay a certain sum of money to the holder after a definite period, usually 10 to 20 years. Security is usually pledged against a bond; unsecured bonds are regarded as a long-term obligation on the capital of the issuing body. Some bonds are convertible upon maturity into the stock of the issuing company. One method used to retire bonds is the sinking fund; in such a case the issuing body buys back some of its bonds each year and holds them itself, applying the interest to the fund. The entire bond issue, most of which the firm has already acquired, is then retired on maturity. In the case of serial bonds, part of the issue is called in and paid for in full each year. Bonds were sold by the U.S. government to finance both World Wars and are still an important money-raising device. Government bonds are backed by the full faith and credit of the government issuing them, including its taxing power, and sometimes also by specifically designated security. Bonds are usually bought by those wishing conservative investment. A junk bond has a risky credit rating because it is issued by companies without an established earnings history or with a questionable credit history. Junk bonds have increasingly been used to help finance the purchase of companies, especially in leveraged buyouts.

Bibliography

See L. A. Jones, Bonds and Bond Securities (4th ed., 4 vol., 1935–50); T. R. Atkinson, Trends in Corporate Bond Quality (1967); A. Rabinowitz, Municipal Bond Finance and Administration (1969); H. D. Sherman and R. E. Schrager, Junk Bonds and Tender Offer Financing (1987); D. R. Nichols, The Personal Investor's Complete Book of Bonds (1988).

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bond

In construction, the systematic arrangement of bricks or other building units (e.g., concrete blocks, glass blocks, or clay tiles) to ensure stability. Units laid with their ends toward the face of a wall are called headers; units with their lengths parallel to the wall are called stretchers. Common types are the English bond (courses of stretchers and headers alternate), the Flemish or Dutch bond (headers and stretchers are laid alternately within each course, each header being centered over the stretcher below it), and the American bond (every fifth or sixth course consists of headers, the rest being stretchers). See also masonry.

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bond

In finance, loan contract issued by local, state, and national governments and by private corporations, specifying an obligation to return borrowed funds. The issuer promises to pay interest on the debt when due (usually semiannually) at a stipulated percentage of the face value and to redeem the face value of the bond at maturity in legal tender. Bonds usually indicate a debt of substantial size and are issued in more formal fashion than promissory notes, ordinarily under seal. Government bonds may be backed by taxes, or they may be revenue bonds, backed only by revenue from the specific project (toll roads, airports, etc.) to which they are committed. Bonds are rated based on the issuer's creditworthiness. The ratings, assigned by independent rating agencies, generally run from AAA to D; bonds with ratings from AAA to BBB are regarded as suitable for investment. See also junk bond.

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bond

In law, a formal written agreement by which a person undertakes to perform a certain act (e.g., appearing in court or fulfilling the obligations of a contract). Failure to perform the act obligates the person to pay a sum of money or to forfeit money on deposit. A bond is an incentive to fulfill an obligation; it also provides reassurance that compensation is available if the duty is not fulfilled. A surety usually is involved, and the bond makes the surety responsible for the consequences of the obligated person's behaviour. See also bail.