Bonds

A bond is a standardized loan issued as a security. By purchasing a bond, an investor lends money to a government, company, bank or other issuer. The issuer generally commits to interest payments and repayment of the nominal amount at maturity, provided it remains solvent.

A conventional bond pays a coupon calculated on its nominal value. Overall return also depends on the purchase price, remaining term, fees and whether the issuer makes all payments. A bond bought below nominal value can generate an additional gain at maturity, while one bought above nominal value can result in a capital loss. See how bonds work.

Bonds can provide regular income, comparatively predictable cash flows and diversification alongside shares. High-quality bonds generally fluctuate less than equities, although this is not guaranteed. Their portfolio effect depends on credit quality, maturity, currency and interest-rate sensitivity. Read about the role of bonds in a portfolio.

Credit risk is the possibility that the issuer cannot meet payments. Interest-rate risk means existing bond prices generally fall when market rates rise. Inflation can reduce the real value of fixed payments. Foreign-currency bonds add exchange-rate risk, while limited liquidity can make selling more difficult or expensive. See bond opportunities and risks.

Government bonds finance public expenditure, while corporate bonds fund companies. High-yield bonds offer higher coupons for greater default risk. Secured bonds are backed by assets, floating-rate bonds adjust coupons to a reference rate, and sustainable bonds finance or link to environmental or social objectives. See Bonds: The Predictable Part of the Portfolio.

Swiss Confederation bonds, Swiss Pfandbriefe and non-CHF bonds open at 08:30 CET on SIX Swiss Exchange. Other CHF bonds open at 09:30. Trading ends at 17:00. Investors should check the segment and currency because opening times differ. See trading hours on SIX Swiss Exchange.