What is a government bond?

In short it is an IOU that can be traded in the financial markets. If a government wants to borrow money (and most do) they usually do it by selling bonds to investors. The investor then gets to receive a stream of future payments. The most common form of bond involves two types of payment by the borrower to the holder of the bond:

What is a bond & how does it work?

BBC World Service economics correspondent Andrew Walker has this breakdown of the world of bonds. What is a bond? In short it is an IOU that can be traded in the financial markets. If a government wants to borrow money (and most do) they usually do it by selling bonds to investors. The investor then gets to receive a stream of future payments.

How do you buy government bonds?

Individual investors can also buy them, usually through a broker. Government bonds are often sold initially (or issued) at auctions, to financial institutions known as primary dealers. The bonds can then be resold in the markets. What have bonds got to do with quantitative easing?

What agencies issue bonds?

Other official agencies also issue bonds, including the World Bank and the European Stability Mechanism (one of the agencies for eurozone bailouts). Bonds are also issued by businesses, often to fund investment or takeovers. These are known as corporate bonds. Who buys them?