While all bonds share basic characteristics such as terms, rates, and par values, all bonds are not alike. One of the major differences is that they're issued, or sold, by four distinct entities in the U.S. and by comparable issuers around the world.
Corporations
issue bonds to raise money for expansion, research and development, and other expenses of doing business. While corporations can also raise money by selling new stocks, they may prefer bonds because the existing stocks lose value when new stocks are issued.
Municipal governments,
such as states and cities, sell bonds to fund special projects and pay for regular expenses.
The U.S. Treasury
issues bonds to meet its regular and unusual obligations.
Government agencies
issue bonds to raise capital to do their work, such as provide mortgage money or student loans.
You can buy some of these bonds when they are issued and most already-issued bonds in what's known as the
secondary market.
That means they're traded
over the counter (OTC)
and in the bond trading rooms of stock exchanges and brokerage firms around the country.
For example, if you want to keep a certain percentage of your assets in bonds and one of your bonds is called, you'll have the principal to invest. If interest rates on new bonds are low, you might prefer to buy an older, higher-paying bond in the secondary market.
Alexandra Lebenthal, President and Chief
Executive Officer of
Alexandra &
James, Inc.
A municipal bond is evidence of the collective debt a community takes on to pay for the public necessities that underpin commerce, society, and the quality of life. You can't get up in the morning, flick on a light, take a shower, a subway, a bus, go over the bridge or under the river without a municipal bond touching your life.
Alexandra Lebenthal, President and Chief