Features of bonds

The most important features of a bond are:

Nominal, principal or face amount — the issuer pays interest on this amount, and it is the amount which has to be paid back at the end. Redemption amount exist in some structured bonds which is different from the face amount and can be connected to performance of particular assets such as a stock or commodity index, FOREX or a fund.

Issue price — investors buy the bonds at this price when they are first issued, which will be approximately same value as the nominal amount. The issue price is the net proceeds that the issuer receives, and it is less than issuance fees.

Maturity date — the issuer has to repay the nominal amount on this date, the issuer has no more obligations to the bond holders after the maturity date as long as all payments have been made.


In the market for U.S. Treasury securities, There are three groups of bond maturities:

• Short term (bills): Short maturities up to one year;

• Medium term (notes): Medium maturities between one and ten years;

• Long term (bonds): Long maturities greater than ten years. 

Coupon — the interest rate paid to the bond holders by the issuer. This rate is typically fixed throughout the life of the bond. It can also be variant with a money market index, such as LIBOR, or it can be even more exotic.

Indentures and Covenants — the terms of a bond issue is established through an indenture which is a formal debt agreement, while covenants are the terms of such an agreement. High yield bonds the credit rating agencies rate these bonds below investment grade. Investors expect to earn a higher yield because these bonds are more risky than investment grade bonds. These bonds are also called junk bonds.

Coupon dates —the issuer pays the coupon to the bond holders on this date. Most bonds are semi-annual in the U.S. and also in the U.K. and Europe, so they pay a coupon every six months. Optionality: an embedded option may occasionally exist among a bond terms; meaning that it grants option-like features to the holder or the issuer:

Callability — an optional date on which the issuer has the right to repay the bond before the maturity date; these bonds are called callable bonds.

Putability — It is a bond given right to the holder so as to force the issuer to repay the bond before the maturity date on the put dates; (Note: "Putable" refers to an implicit put option; "Puttable" means that it may be putted.

Call dates and put dates— callable and putable bonds can be redeemed early on that date.

Convertible bond bondholder is allowed to exchange a bond through it to a number of shares of the issuer's common stock.

Exchangeable bond exchange to shares of a corporation other than the issuer is allowed through it.



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