Bonds

A bond is a security representing a debt. Bonds are securities used by governments, non-financial or financial companies to borrow on the financial markets. For the bond issuer, a bond is a form of borrowing. For the bond investor, it is a form of lending.

Difference between credit and securitized debt

The main characteristics

• The amount: a standard issue is around €500M
• The duration 
• The interest, or coupon, rate
• The interest payment terms
• The terms of capital repayment
• The level of counterparty risk (rating)
• The price
• The rate of return

Role of the bank

The role of the bank during a bond issue is to:

• advise the client on the type of issue (duration, fixed or variable rate, type of bond, which currency, etc.);
• inform them about the state of the market and the level of investor appetite for their bonds;
• advise them whether or not to seek a credit rating for the issue.

It is the DCM (Debt Capital Markets) departments of the banks that help clients issue debt securities on the markets.