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A fixed-income instrument representing a loan from an investor to a borrower, typically a corporation or government, that pays periodic interest and returns principal at maturity.
When you buy a bond, you are lending money to the issuer in exchange for regular interest payments (coupons) and the return of face value at maturity. A $1,000 bond with a 5% coupon pays $50 per year. Bond prices move inversely to interest rates: when rates rise, bond prices fall, and vice versa. Bonds are rated by agencies like Moody's and S&P based on credit risk. Investment-grade bonds (BBB/Baa and above) are considered relatively safe, while high-yield ("junk") bonds carry more risk and higher yields.