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Bond (finance)From Wikipedia, the free encyclopedia

This article is about the financial instrument. For other uses, seeBond (disambiguation).

Securities

Securities[show]

Markets[show]

Bonds by coupon[show]

Bonds by issuer[show]

Equities (stocks)[show]

Investment funds[show]

Structured finance[show]

Derivatives[show]

V T E

Infinance,a bondis an instrument of indebtedness of the bond issuer to the holders. It is adebtsecurity,under which the issuer owes the holders a debt and, depending on the terms of thebond, is obliged to pay theminterest(thecoupon)and/or to repay the principal at a later date,termed thematuritydate.[1]Interest is usually payable at fixed intervals (semiannual, annual,sometimes monthly). Very often the bond is negotiable, i.e. the ownership of the instrument canbe transferred in the secondary market. This means that once the transfer agents at the bankmedallion stamp the bond, it is highly liquid on the second market.[2]

Thus a bond is a form ofloanorIOU:the holderof the bond is the lender (creditor), the issuerofthe bond is the borrower (debtor), and the couponis the interest. Bonds provide the borrowerwith external funds to finance long-terminvestments,or, in the case ofgovernment bonds,tofinance current expenditure.Certificates of deposit(CDs) or short termcommercial paperareconsidered to bemoney marketinstruments and not bonds: the main difference is in the length of

the term of the instrument.

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Bonds andstocksare bothsecurities,but the major difference between the two is that (capital)stockholders have anequitystake in the company (i.e. they are investors), whereas bondholdershave a creditor stake in the company (i.e. they are lenders). Being a creditor, bondholders haveabsolute priority and will be repaid before stockholders (who are owners) in the event ofbankruptcy.[3]Another difference is that bonds usually have a defined term, or maturity, afterwhich the bond is redeemed, whereas stocks are typically outstanding indefinitely. An exception

is an irredeemable bond, such asConsols,which is aperpetuity,i.e. a bond with no maturity.

Contents

[hide]

1 Issuance

2 Featureso 2.1 Principalo 2.2 Maturityo 2.3 Coupono 2.4 Yieldo 2.5 Credit Quality

o 2.6 Market Priceo 2.7 Others

3 Typeso 3.1 Foreign currencies

4 Bond valuation

5 Investing in bondso 5.1 Bond indices

6 See also

7 References

8 External links

Issuance[edit]

Bonds are issued by public authorities, credit institutions, companiesandsupranationalinstitutions in theprimary markets.The most common process for issuingbonds is throughunderwriting.When a bond issue is underwritten, one or more securities firmsor banks, forming asyndicate,buy the entire issue of bonds from the issuer and re-sell them toinvestors. The security firm takes the risk of being unable to sell on the issue to end investors.Primary issuance is arranged bybookrunnerswho arrange the bond issue, have direct contactwith investors and act as advisers to the bond issuer in terms of timing and price of the bondissue. The bookrunner is listed first among all underwriters participating in the issuance inthetombstone adscommonly used to announce bonds to the public. The bookrunners'willingness to underwrite must be discussed prior to any decision on the terms of the bond issueas there may be limited demand for the bonds.

In contrast, government bonds are usually issued in an auction. In some cases both members ofthe public and banks may bid for bonds. In other cases only market makers may bid for bonds.Theoverall rate of returnon the bond depends on both the terms of the bond and the pricepaid.[4]The terms of the bond, such as the coupon, are fixed in advance and the price isdetermined by the market.

In the case of an underwritten bond, the underwriters will charge a fee for underwriting. Analternative process for bond issuance, which is commonly used for smaller issues and avoids thiscost, is the private placement bond. Bonds sold directly to buyers and may not be tradeable inthe bond market.[5]

Historically an alternative practice of issuance was for the borrowing government authority toissue bonds over a period of time, usually at a fixed price, with volumes sold on a particular day

dependent on market conditions. This was called a tap issueor bond tap.[6]

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Features[edit]Principal[edit]

Nominal, principal, par or face amount is the amount on which the issuer pays interest, andwhich, most commonly, has to be repaid at the end of the term. Some structured bonds can have

a redemption amount which is different from the face amount and can be linked to performanceof particular assets such as a stock or commodity index, foreign exchange rate or a fund. Thiscan result in an investor receiving less or more than his original investment at maturity.

Maturity[edit]

The issuer has to repay the nominal amount on thematuritydate. As long as all due paymentshave been made, the issuer has no further obligations to the bond holders after the maturity date.The length of time until the maturity date is often referred to as the term or tenor or maturity of abond. The maturity can be any length of time, although debt securities with a term of less thanone year are generally designated money market instruments rather than bonds. Most bondshave a term of up to 30 years. Some bonds have been issued with terms of 50 years or more,and historically there have been some issues with no maturity date (irredeemables). In the

market for United States Treasury securities, there are three categories of bond maturities:

short term (bills): maturities between one to five year; (instruments with maturities less thanone year are called Money Market Instruments)

medium term (notes): maturities between six to twelve years;

long term (bonds): maturities greater than twelve years.

Coupon[edit]

Thecouponis the interest rate that the issuer pays to the holder. Usually this rate is fixedthroughout the life of the bond. It can also vary with a money market index, such asLIBOR,or itcan be even more exotic. The name "coupon" arose because in the past, paper bond certificateswere issued which had coupons attached to them, one for each interest payment. On the due

dates the bondholder would hand in the coupon to a bank in exchange for the interest payment.Interest can be paid at different frequencies: generally semi-annual, i.e. every 6 months, orannual.

Bond issued by theDutch East India Companyin 1623

Yield[edit]

The yield is the rate of return received from investing in the bond. It usually refers either to

thecurrent yield,or running yield, which is simply the annual interest payment divided by thecurrent market price of the bond (often theclean price), or to

theyield to maturityor redemption yield, which is a more useful measure of the return of thebond, taking into account the current market price, and the amount and timing of all

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remaining coupon payments and of the repayment due on maturity. It is equivalent totheinternal rate of returnof a bond.

Credit Quality[edit]

The "quality" of the issue refers to the probability that the bondholders will receive the amountspromised at the due dates. This will depend on a wide range of factors.High-yield bondsare

bonds that are rated below investment grade by thecredit rating agencies.As these bonds aremore risky than investment grade bonds, investors expect to earn a higher yield. These bondsare also calledjunk bonds.

Market Price[edit]

The market price of a tradeable bond will be influenced amongst other things by the amounts,currency and timing of the interest payments and capital repayment due, the quality of the bond,and the available redemption yield of other comparable bonds which can be traded in themarkets.

The price can be quoted ascleanordirty.("Dirty" includes the present value of all future cashflows including accrued interest. Most often used in Europe.; "Clean" does not include accruedinterest. Most often used in the U.S.[7])

The issue price at which investors buy the bonds when they are first issued will typically beapproximately equal to the nominal amount. The net proceeds that the issuer receives are thusthe issue price, less issuance fees. The market price of the bond will vary over its life: it maytrade at a premium (above par, usually because market interest rates have fallen since issue), orat a discount (price below par, if market rates have risen or there is a highprobability ofdefaulton the bond).

Others[edit]

Indentures and Covenants Anindentureis a formal debt agreement that establishes theterms of a bond issue, while covenants are the clauses of such an agreement. Covenants

specify the rights of bondholders and the duties of issuers, such as actions that the issuer isobligated to perform or is prohibited from performing. In the U.S., federal and state securitiesand commercial laws apply to the enforcement of these agreements, which are construed bycourts as contracts between issuers and bondholders. The terms may be changed only withgreat difficulty while the bonds are outstanding, with amendments to the governing documentgenerally requiring approval by amajority(orsuper-majority)vote of the bondholders.

Optionality: Occasionally a bond may contain anembedded option;that is, it grantsoption-likefeatures to the holder or the issuer:

Callability Some bonds give the issuer the right to repay the bond before the maturitydate on the call dates; seecall option.These bonds are referred to ascallable bonds.Most callable bonds allow the issuer to repay the bond atpar.With some bonds, theissuer has to pay a premium, the so-calledcall premium.This is mainly the case forhigh-yield bonds. These have very strict covenants, restricting the issuer in itsoperations. To be free from these covenants, the issuer can repay the bonds early, butonly at a high cost.

Putability Some bonds give the holder the right to force the issuer to repay the bondbefore the maturity date on the put dates; seeput option.These are referred to asretractable orputable bonds.

call dates and put datesthedateson which callable and putable bonds can beredeemed early. There are four main categories.

A Bermudan callable has several call dates, usually coinciding with coupon dates.

A European callable has only one call date. This is a special case of a Bermudancallable.

An American callable can be called at any time until the maturity date.

A death put is an optional redemption feature on a debt instrument allowing thebeneficiary of the estate of a deceased bondholder to put (sell) the bond (back to the

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issuer) at face value in the event of the bondholder's death or legal incapacitation.Also known as a "survivor's option".

sinking fund provision of the corporate bond indenture requires a certain portion of the issueto be retired periodically. The entire bond issue can be liquidated by the maturity date. If thatis not the case, then the remainder is called balloon maturity. Issuers may either pay totrustees, which in turn call randomly selected bonds in the issue, or, alternatively, purchase

bonds in open market, then return them to trustees.

Types[edit]

Bond certificate for the state of South Carolina issued in 1873 under the state's Consolidation Act.

Railroad obligation Moscow-Kiev-Voronezh

The following descriptions are not mutually exclusive, and more than one of them may apply to aparticular bond.

Fixed rate bondshave a coupon that remains constant throughout the life of the bond. Avariation are stepped-coupon bonds, whose coupon increases during the life of the bond.

Floating rate notes(FRNs, floaters) have a variable coupon that is linked to areferencerateof interest, such asLIBORorEuribor.For example the coupon may be defined as threemonth USD LIBOR + 0.20%. The coupon rate is recalculated periodically, typically every one

or three months. Zero-coupon bonds(zeros) pay no regular interest. They are issued at a substantial discount

topar value,so that the interest is effectively rolled up to maturity (and usually taxed assuch). The bondholder receives the full principal amount on the redemption date. Anexample of zero coupon bonds is Series E savings bonds issued by the U.S.government.Zero-coupon bondsmay be created from fixed rate bonds by a financialinstitution separating ("stripping off") the coupons from the principal. In other words, theseparated coupons and the final principal payment of the bond may be traded separately.See IO (Interest Only) and PO (Principal Only).

High-yield bonds(junk bonds) are bonds that are rated below investment grade by thecreditrating agencies.As these bonds are more risky than investment grade bonds, investorsexpect to earn a higher yield.

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Convertible bondslets a bondholder exchange a bond to a number of shares of the issuer'scommon stock. These are known ashybrid investments,because theycombineequityanddebtfeatures.

Exchangeable bondsallows for exchange to shares of a corporation other than the issuer.

Inflation-indexed bonds(linkers) (US) or Index-linked bond (UK), in which the principalamount and the interest payments are indexed to inflation. The interest rate is normally lowerthan for fixed rate bonds with a comparable maturity (this position briefly reversed itself forshort-term UK bonds in December 2008). However, as the principal amount grows, thepayments increase with inflation. TheUnited Kingdomwas the first sovereign issuer to issueinflation linkedgiltsin the 1980s.Treasury Inflation-Protected Securities(TIPS) andI-bondsare examples of inflation linked bonds issued by the U.S. government.

Receipt for temporary bonds for the state of Kansas issued in 1922

Other indexed bonds, for exampleequity-linked notesand bonds indexed on a businessindicator (income, added value) or on a country'sGDP.

Asset-backed securitiesare bonds whose interest and principal payments are backed byunderlying cash flows from other assets. Examples of asset-backed securities aremortgage-backed securities(MBS's),collateralized mortgage obligations(CMOs) andcollateralizeddebt obligations(CDOs).

Subordinated bondsare those that have a lower priority than other bonds of the issuer incase ofliquidation.In case of bankruptcy, there is a hierarchy of creditors. Firsttheliquidatoris paid, then government taxes, etc. The first bond holders in line to be paid arethose holding what is called senior bonds. After they have been paid, the subordinated bondholders are paid. As a result, the risk is higher. Therefore, subordinated bonds usually havea lower credit rating than senior bonds. The main examples of subordinated bonds can befound in bonds issued by banks, and asset-backed securities. The latter are often issuedintranches.The senior tranches get paid back first, the subordinated tranches later.

Covered bondare backed by cash flows from mortgages or public sector assets. Contrarytoasset-backed securitiesthe assets for such bonds remain on the issuers balance sheet.

Perpetual bondsare also often calledperpetuitiesor 'Perps'. They have no maturity date.The most famous of these are the UK Consols, which are also known as Treasury Annuities

or Undated Treasuries. Some of these were issued back in 1888 and still trade today,although the amounts are now insignificant. Some ultra-long-term bonds (sometimes a bond

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can last centuries: West Shore Railroad issued a bond which matures in 2361 (i.e. 24thcentury) are virtually perpetuities from a financial point of view, with the current value ofprincipal near zero.

Bearer bondis an official certificate issued without a named holder. In other words, theperson who has the paper certificate can claim the value of the bond. Often they areregistered by a number to prevent counterfeiting, but may be traded like cash. Bearer bonds

are very risky because they can be lost or stolen. Especially after federal income tax beganin the United States, bearer bonds were seen as an opportunity to conceal income orassets.[8]U.S. corporations stopped issuing bearer bonds in the 1960s, the U.S. Treasurystopped in 1982, and state and local tax-exempt bearer bonds were prohibited in 1983.[9]

Registered bond is a bond whose ownership (and any subsequent purchaser) is recorded bythe issuer, or by a transfer agent. It is the alternative to aBearer bond.Interest payments,and the principal upon maturity, are sent to the registered owner.

Agovernment bond,also called Treasury bond, is issued by a national government and isnot exposed to default risk. It is characterized as the safest bond, with the lowest interestrate. A treasury bond is backed by the full faith and credit of the relevant government. Forthat reason, for the major OECD countries this type of bond is often referred to as risk-free.

Pacific Railroad Bondissued by City and County of San Francisco, CA. May 1, 1865

Municipal bondis a bond issued by a state, U.S. Territory, city, local government, or theiragencies. Interest income received by holders of municipal bonds is oftenexemptfrom thefederalincome taxand from the income tax of the state in which they are issued, althoughmunicipal bonds issued for certain purposes may not be tax exempt.

Build America Bonds (BABs) are a form ofmunicipal bondauthorized by theAmericanRecovery and Reinvestment Act of 2009.Unlike traditional US municipal bonds, which areusually tax exempt, interest received on BABs is subject to federal taxation. However, aswith municipal bonds, the bond is tax-exempt within the US state where it is issued.

Generally, BABs offer significantly higher yields (over 7 percent) than standard municipalbonds.[10]

Book-entry bond is a bond that does not have a paper certificate. As physically processingpaper bonds and interest coupons became more expensive, issuers (and banks that used tocollect coupon interest for depositors) have tried to discourage their use. Some book-entrybond issues do not offer the option of a paper certificate, even to investors who preferthem.[11]

Lottery bondsare issued by European and other states. Interest is paid as on a traditionalfixed rate bond, but the issuer will redeem randomly selected individual bonds within theissue according to a schedule. Some of these redemptions will be for a higher value than theface value of the bond.

War bondis a bond issued by a country to fund a war.

Serial bondis a bond that matures in instalments over a period of time. In effect, a $100,000,5-year serial bond would mature in a $20,000 annuity over a 5-year interval.

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Revenue bondis a special type of municipal bond distinguished by its guarantee ofrepayment solely from revenues generated by a specified revenue-generating entityassociated with the purpose of the bonds. Revenue bonds are typically "non-recourse,"meaning that in the event of default, the bond holder has no recourse to other governmentalassets or revenues.

Climate bondis a bond issued by a government or corporate entity in order to raise finance

for climate change mitigation- or adaptation-related projects or programmes. Dual currency bonds[12]

Retail bond is a type of corporate bond with very low interest rates mostly designed forordinary investors in the industry.[13]They have become particularly attractive sincetheLondon Stock Exchange(LSE) launched an order book for retail bonds.[14]

Social impact bondsare an agreement for public sector entities to pay back private investorsafter meeting verified improved social outcome goals that result in public sector savings frominnovative social program pilot projects.

Foreign currencies[edit]

Some companies, banks, governments, and other sovereign entities may decide to issue bondsin foreign currencies as it may appear to be more stable and predictable than their domesticcurrency. Issuing bonds denominated in foreign currencies also gives issuers the ability toaccess investment capital available in foreign markets. The proceeds from the issuance of thesebonds can be used by companies to break into foreign markets, or can be converted into theissuing company's local currency to be used on existing operations through the use of foreignexchange swap hedges. Foreign issuer bonds can also be used to hedge foreign exchange raterisk. Some foreign issuer bonds are called by their nicknames, such as the "samurai bond."These can be issued by foreign issuers looking to diversify their investor base away fromdomestic markets. These bond issues are generally governed by the law of the market ofissuance, e.g., a samurai bond, issued by an investor based in Europe, will be governed byJapanese law. Not all of the following bonds are restricted for purchase by investors in themarket of issuance.

Eurodollarbond, a U.S. dollar-denominated bond issued by a non-U.S. entityoutside theU.S[15]

Baklava bond, a bond denominated in Turkish Lira and issued by a domestic or foreign entityin the Turkish market[16]

Yankee bond, a US dollar-denominated bond issued by a non-US entity in the US market

Kangaroo bond, an Australian dollar-denominated bond issued by a non-Australian entity inthe Australian market

Maple bond, a Canadian dollar-denominated bond issued by a non-Canadian entity in theCanadian market

Samurai bond,a Japanese yen-denominated bond issued by a non-Japanese entity in theJapanese market

Uridashi bond,a non-yen-demoninated bond sold to Japanese retail investors. Shibosai Bond, a private placement bond in Japanese market with distribution limited to

institutions and banks.

Shogun bond, a non-yen-denominated bond issued in Japan by a non-Japanese institutionor government[17]

Bulldog bond, a pound sterling-denominated bond issued in London by a foreign institution orgovernment.

Matrioshka bond, a Russian rouble-denominated bond issued in the Russian Federation bynon-Russian entities. The name derives from the famous Russian wooden dolls,Matrioshka,popular among foreign visitors to Russia

Arirang bond,a Korean won-denominated bond issued by a non-Korean entity in the Koreanmarket[18]

Kimchi bond,a non-Korean won-denominated bond issued by a non-Korean entity in theKorean market[19]

http://en.wikipedia.org/wiki/Revenue_bondhttp://en.wikipedia.org/wiki/Revenue_bondhttp://en.wikipedia.org/wiki/Climate_bondhttp://en.wikipedia.org/wiki/Climate_bondhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-12http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-12http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-12http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-13http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-13http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-13http://en.wikipedia.org/wiki/London_Stock_Exchangehttp://en.wikipedia.org/wiki/London_Stock_Exchangehttp://en.wikipedia.org/wiki/London_Stock_Exchangehttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-14http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-14http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-14http://en.wikipedia.org/wiki/Social_impact_bondhttp://en.wikipedia.org/wiki/Social_impact_bondhttp://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=11http://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=11http://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=11http://en.wikipedia.org/wiki/Eurodollarhttp://en.wikipedia.org/wiki/Eurodollarhttp://en.wikipedia.org/wiki/United_States_entityhttp://en.wikipedia.org/wiki/United_States_entityhttp://en.wikipedia.org/wiki/United_States_entityhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-15http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-15http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-16http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-16http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-16http://en.wikipedia.org/wiki/Samurai_bondhttp://en.wikipedia.org/wiki/Samurai_bondhttp://en.wikipedia.org/wiki/Uridashi_bondshttp://en.wikipedia.org/wiki/Uridashi_bondshttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-17http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-17http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-17http://en.wikipedia.org/wiki/Matrioshkahttp://en.wikipedia.org/wiki/Matrioshkahttp://en.wikipedia.org/wiki/Matrioshkahttp://en.wikipedia.org/wiki/Arirang_bondhttp://en.wikipedia.org/wiki/Arirang_bondhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-18http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-18http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-18http://en.wikipedia.org/wiki/Kimchi_bondhttp://en.wikipedia.org/wiki/Kimchi_bondhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-19http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-19http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-19http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-19http://en.wikipedia.org/wiki/Kimchi_bondhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-18http://en.wikipedia.org/wiki/Arirang_bondhttp://en.wikipedia.org/wiki/Matrioshkahttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-17http://en.wikipedia.org/wiki/Uridashi_bondshttp://en.wikipedia.org/wiki/Samurai_bondhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-16http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-15http://en.wikipedia.org/wiki/United_States_entityhttp://en.wikipedia.org/wiki/Eurodollarhttp://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=11http://en.wikipedia.org/wiki/Social_impact_bondhttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-14http://en.wikipedia.org/wiki/London_Stock_Exchangehttp://en.wikipedia.org/wiki/Bond_(finance)#cite_note-13http://en.wikipedia.org/wiki/Bond_(finance)#cite_note-12http://en.wikipedia.org/wiki/Climate_bondhttp://en.wikipedia.org/wiki/Revenue_bond

8/12/2019 Bondas

9/11

8/12/2019 Bondas

10/11

8/12/2019 Bondas

11/11

Bond prices can become volatile depending on the credit rating of the issuerfor instance ifthecredit rating agencieslikeStandard & Poor'sandMoody'supgrade or downgrade thecredit rating of the issuer. An unanticipated downgrade will cause the market price of thebond to fall. As with interest rate risk, this risk does not affect the bond's interest payments(provided the issuer does not actually default), but puts at risk the market price, which affectsmutual funds holding these bonds, and holders of individual bonds who may have to sell

them. A company's bondholders may lose much or all their money if the company goesbankrupt.

Under the laws of many countries (including the United States and Canada), bondholdersare in line to receive the proceeds of the sale of the assets of a liquidated company ahead ofsome other creditors. Bank lenders, deposit holders (in the case of a deposit takinginstitution such as a bank) and trade creditors may take precedence.

There is no guarantee of how much money will remain to repay bondholders. As an example,after an accounting scandal and aChapter 11bankruptcy at the giant telecommunicationscompanyWorldcom,in 2004 its bondholders ended up being paid 35.7 cents on the dollar[citationneeded]. In a bankruptcy involving reorganization or recapitalization, as opposed to liquidation,bondholders may end up having the value of their bonds reduced, often through an exchange fora smaller number of newly issued bonds.

Some bonds are callable, meaning that even though the company has agreed to makepayments plus interest towards the debt for a certain period of time, the company canchoose to pay off the bond early. This createsreinvestment risk,meaning the investor isforced to find a new place for his money, and the investor might not be able to find as good adeal, especially because this usually happens when interest rates are falling.

Bond indices[edit]See also:Bond market index

A number of bond indices exist for the purposes of managing portfolios and measuringperformance, similar to theS&P 500orRussell Indexesforstocks.The most common Americanbenchmarks are theBarclays Capital Aggregate(ex Lehman Aggregate),CitigroupBIGandMerrill Lynch Domestic Master.Most indices are parts of families of broader indices thatcan be used to measure global bond portfolios, or may be further subdivided by maturity and/or sectorfor managing specialized portfolios.

http://en.wikipedia.org/wiki/Credit_rating_agencyhttp://en.wikipedia.org/wiki/Credit_rating_agencyhttp://en.wikipedia.org/wiki/Credit_rating_agencyhttp://en.wikipedia.org/wiki/Standard_%26_Poor%27shttp://en.wikipedia.org/wiki/Standard_%26_Poor%27shttp://en.wikipedia.org/wiki/Standard_%26_Poor%27shttp://en.wikipedia.org/wiki/Moody%27shttp://en.wikipedia.org/wiki/Moody%27shttp://en.wikipedia.org/wiki/Moody%27shttp://en.wikipedia.org/wiki/Bankrupthttp://en.wikipedia.org/wiki/Bankrupthttp://en.wikipedia.org/wiki/Bankrupthttp://en.wikipedia.org/wiki/Chapter_11http://en.wikipedia.org/wiki/Chapter_11http://en.wikipedia.org/wiki/Chapter_11http://en.wikipedia.org/wiki/MCI_Inc.http://en.wikipedia.org/wiki/MCI_Inc.http://en.wikipedia.org/wiki/MCI_Inc.http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Reinvestment_riskhttp://en.wikipedia.org/wiki/Reinvestment_riskhttp://en.wikipedia.org/wiki/Reinvestment_riskhttp://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=14http://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=14http://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=14http://en.wikipedia.org/wiki/Bond_market_indexhttp://en.wikipedia.org/wiki/Bond_market_indexhttp://en.wikipedia.org/wiki/Bond_market_indexhttp://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/Russell_Indexeshttp://en.wikipedia.org/wiki/Russell_Indexeshttp://en.wikipedia.org/wiki/Russell_Indexeshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Barclays_Capital_Aggregate_Bond_Indexhttp://en.wikipedia.org/wiki/Barclays_Capital_Aggregate_Bond_Indexhttp://en.wikipedia.org/wiki/Barclays_Capital_Aggregate_Bond_Indexhttp://en.wikipedia.org/wiki/Citigroup_BIGhttp://en.wikipedia.org/wiki/Citigroup_BIGhttp://en.wikipedia.org/wiki/Citigroup_BIGhttp://en.wikipedia.org/wiki/Citigroup_BIGhttp://en.wikipedia.org/wiki/Merrill_Lynch_Domestic_Masterhttp://en.wikipedia.org/wiki/Merrill_Lynch_Domestic_Masterhttp://en.wikipedia.org/wiki/Merrill_Lynch_Domestic_Masterhttp://en.wikipedia.org/wiki/Merrill_Lynch_Domestic_Masterhttp://en.wikipedia.org/wiki/Citigroup_BIGhttp://en.wikipedia.org/wiki/Citigroup_BIGhttp://en.wikipedia.org/wiki/Barclays_Capital_Aggregate_Bond_Indexhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Russell_Indexeshttp://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/Bond_market_indexhttp://en.wikipedia.org/w/index.php?title=Bond_(finance)&action=edit&section=14http://en.wikipedia.org/wiki/Reinvestment_riskhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/MCI_Inc.http://en.wikipedia.org/wiki/Chapter_11http://en.wikipedia.org/wiki/Bankrupthttp://en.wikipedia.org/wiki/Moody%27shttp://en.wikipedia.org/wiki/Standard_%26_Poor%27shttp://en.wikipedia.org/wiki/Credit_rating_agency