All About Bonds

In finance, a bond is some sort of a debt security, where an authorized issuer owes the holders a debt and, depending on the legal terms of the bond, is forced to pay interest (the coupon) and/or to repay the main value at a later date, called maturity. A bond is simply a formal contract to repay borrowed money with interest at constant intervals.

Thus a bond is similar to a loan: the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the form of interest. Bonds give the borrower external funds to finance long-term investments, or, in the case of government bonds, to finance running expenses. Certificates of deposit (CDs) or commercial paper are considered to be instruments of money market not bonds. Bonds must be paid back at constant intervals over a period of time.

Bonds and stocks are both securities, but the main difference between the two is that stockholders have an equity share in the company (i.e., they are owners), whereas bondholders have a creditor share in the company (i.e., they are lenders). Another difference is that bonds usually have a defined maturity, after which the bond is exchanged, whereas stocks may be stay indefinite. An exception is a consol bond, which is a perpetuity (i.e., bond with no maturity)


Issuing bonds 

Bonds are created by official authorities, credit institutions, companies and supranational institutions in the primary markets. The most common process of creating bonds is through underwriting, where one or more securities firms or banks, forming a syndicate, buy an entire lot of bonds from an issuer and re-sell them to investors. The security firm takes the risk of probable failure in selling on the issue to end investors.

On the other side government bonds are typically auctioned. In reality, the current financial crisis tested the willingness of the securities firms to actually perform underwriting. Bookrunners arrange Primary issuance, so they arrange the bond issue, have the direct contact with investors and act as advisors to the bond issuer in terms of timing and price of the bond issue. The bookrunners ability to underwrite must be discussed prior to opening books on a bond issue as there may be limited desire to do so.


Bond indices 

Many bond indices exist in order to manage portfolios and measure performance, just like the S&P 500 or Russell Indexes for stocks. The most famous American benchmarks are the (ex) Lehman Aggregate, Citigroup BIG and Merrill Lynch Domestic Master. The major amount of indices are parts of families of broader indices that are used to measure global bond portfolios, or may be further subcategorized by maturity and/or sector for managing specialized portfolios.



ABOUT THE AUTHOR 

James is an expert in writing about legal forms and documents that may help you when your in the search of the right legal document. He writes many articles about forms ranging from, power of attorney forms, landlord tenant forms, and almost any legal form that your searching for. http://www.forms.com/

Private Bond Activity

How to use private bonds to your advantage, as well as little known facts about private bonds and tax credit properties.

Private Bond Activity Appraisals

Private bond activity appraisals are prepared for apartment complexes in the Low Income Tax Housing Tax Credit program which are obtaining private bond financing. The owners of these apartment projects receive a lower level of tax credits (versus traditional Low Income Housing Tax Credit apartment complexes). However, they receive lower cost financing (since the bonds are not subject to federal income tax).

Private bond activity apartment complexes are approved subject to complying with a series of inflexible rules and are contingent on tax credits being available. Identifying sites for which private bond activity apartment complexes are financially feasible is difficult.

Private bond activity complexes are subject to approval by both the state housing agency and bond issuer.

Appraisals for private bond activity apartment complexes vary in several regards from appraisal for conventional apartments. The value is subject to a land use restriction agreement (LURA). Further, there are typically several definitions of market value (as completed, as stabilized and as though LURA does not apply).

O’Connor & Associates is the largest independent appraisal firm in the southwestern United States and has over 40 full-time staff members engaged full-time in valuation and market study assignments. Their expertise includes private bond activity appraisals, feasibility studies, valuing real estate, business personal property, business enterprise valuation, purchase price allocation for business, valuation for property tax assignments, partial interest valuation, estate tax valuation, expert witness testimony and valuation for condemnation. They have performed hundreds of feasibility studies.

To obtain a quote or further information on private bond activity appraisals, contact George Thomas or Craig Young at 713-686-9955 or fill out our online form.



ABOUT THE AUTHOR 

O'Connor & Associates is a national provider of commercial property real estate consulting services including federal tax reduction, income tax, business valuation, tax deduction, property appraisal, & lease audits.Our services benefit owners of all commercial property types including multi-family housing, retail stores, hospitals, hotels, industrial properties, manufacturing facilities, medical offices, commercial offices, restaurants, self-storage units, shopping malls, shopping plazas & warehouse/distribution centers. http://www.collincentralappraisaldistrict.com/Articles/business_valuation.cfm