Bonds are loans that are, for the most part, traded. The exception would be a private placement bond issue where the debtor institution borrows directly from the investor, bypassing the public markets. Their primary use is to provide income to the holder (investor, creditor), but also figure in the asset allocation process and may be bought and sold for capital gains.
There are three different types of issuers of bonds, or debt instruments, in the United States:
- The federal government and its agencies
- State and municipal governments
These bond issuers follow different rules and, if applicable, varying state and municipal government-issued bond regulations. This section will discuss corporate and federal bonds.
If you need a quick primer on bonds, refer to our Bond Basics Tutorial.
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