Volatility in bonds (particularly short and medium bonds) is lower than for equities. As a result, bonds are generally considered safer investments than equities, but this perception is only partially correct. Bonds suffer less volatility on a daily basis than equities, and bond interest payments are sometimes higher than the general level of dividends. Bonds are often liquid – it`s often easy enough for an institution to sell a large amount of bonds without affecting the price, which can be more difficult for stocks – and the comparative security of a fixed interest payment twice a year and a fixed plan at maturity is attractive. Bondholders also enjoy a certain degree of legal protection: according to the law of most countries, when a company goes bankrupt, bondholders often receive some money (the amount of recovery), while the company`s shares are often worthless. But bonds can also be risky, but less risky than equities: the issue price at which investors buy the bonds on the first issue is usually the nominal amount. The net proceeds received by the issuer are therefore the lower emission price of the issuance costs. The market price of the loan will vary over its lifetime: it can trade with an increase (above the level, usually because market rates have fallen since the issue) or a discount (price below par, if market rates have increased or if there is a high probability of default of the loan). The return is the return on the investment in the loan. Generally, it refers to: historically, coupons were physical appendages to paper loan certificates, each coupon constituting an interest payment. On the maturity date, the bondholder would give the coupon to a bank in return for the payment of interest.
Today, interest payments are almost always paid electronically. Interest can be paid on different frequencies: usually semi-annual, i.e. every six months or annually. Bonds are mainly bought and traded by institutions such as central banks, sovereign wealth funds, pension funds, insurance, hedge funds and banks.