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Knowing Bonds in Online Trading

Bonds are debt securities that the medium-term transferable containing the promise of the issuing party to pay interest in return for a specified period and pay off the principal debt at the appointed time to the purchaser of the bonds.

Types of Bonds

Bonds have several different types, namely:
  • By the publisher:
  1. Corporate Bonds: Bonds issued by companies, either in the form of state-owned enterprises (SOEs), or private entities.
  2. Government Bonds: Bonds issued by the central government.
  3. Municipal Bonds: Bonds issued by local governments to finance projects related to public purposes (public utility).
  • Judging from the interest payment system:
  1. Zero Coupon Bonds: Bond does not make periodic interest payments. However, once interest and principal paid at maturity.
  2. Coupon Bonds: bonds with a coupon that can be cashed on a periodic basis in accordance with the provisions of the publisher.
  3. Fixed Coupon Bonds: Bond with a coupon rate of interest that have been established before the bidding in the primary market and will be paid on a periodic basis.
  4. Floating Coupon Bonds: Bond with a coupon interest rate is determined prior to that time period, based on a reference (benchmark) such as average time deposit (ATD) is the weighted average interest rate of bank deposits from the public and private.
  • Viewed from the right of options:
  1. Convertible Bonds: Bonds which entitles the bondholders to convert bonds into a number of shares owned by the publisher.
  2. Exchangeable Bonds: Bonds which entitles the bondholder to exchange the shares of the company into the number of shares of affiliated companies owned by the publisher.
  3. Callable Bonds: Bonds which entitles the issuer to buy back bonds at a specified price over the life of the bonds.
  4. Putable Bonds: Bonds that give investors the right to require the issuer to buy back bonds at a specified price over the life of the bonds.
  • In terms of security or collateral:
1. Secured Bonds: Bonds are secured by certain property of the issuer or by other third party guarantees. In this group, which includes:
  • Guaranteed Bonds: Bonds that interest and principal repayment guarantee from a third party.
  • Mortgage Bonds: Bond interest and principal repayment is secured by collateral mortgage on the property or fixed assets.
  • Collateral Trust Bonds: Bonds are secured by securities owned by the publisher in its portfolio, such as shares owned subsidiary.
2. Unsecured Bonds: Bonds are not secured by specific property but the property secured by the issuer in general.

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