Investment products
Government and corporate bonds explained
Bonds are fixed-income investments issued by governments, corporations and other entities. They are investments, not bank deposits.
How a bond works
An investor lends capital to an issuer under defined terms. Depending on the bond, income may be paid periodically or at maturity, when the issuer is expected to repay the principal.
Government bonds
These are issued by national or regional governments. Risk varies substantially between issuers, currencies and maturities; government issuance does not mean an investment is risk-free.
Corporate bonds
Companies issue bonds to raise finance. Credit quality, ranking, security and the issuer's ability to meet payments all affect risk.
Risks to understand
- Market value can rise or fall before maturity
- The issuer may fail to make payments
- Currency movements can affect returns
- Selling before maturity may be difficult or costly
Capital is at risk. Deposit protection does not generally apply to bonds.
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