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As we continue our focus on the national budget, we present yet another term, which relates to another way in which governments finance their capital projects and programmes. Today’s term: Bonds

A Bond is a formal contract in which an investor loans money to an entity (corporate or governmental) for a defined period of time, typically at a fixed interest rate. The entity i.e. government or company (the issuer) issues a term sheet or prospectus document which states the interest rate (coupon) that will be paid and when the loaned funds (principal) are to be repaid. The two features, which determine the interest rate on a bond, are the credit quality and the duration. Bond maturities range from a one year note to a 30-year government or corporate bond.

What does this mean for you?

Persons looking to invest should consider bonds as an option. Bonds have relatively low risk levels and therefore are considered fairly safe investments. In the case of a 30-year government bond, for example, the purchaser can view this as a retirement investment. For more information on Bonds, please call ECFH Global Investment Solutions at 457-7233.