Bonds Dictionary Definitions

Bonds refers to a card or coupon that can be exchanged for certain types of economic goods, whether these are necessities or money.

The etymological origin of the word bonus goes back to the Latin term bonus , which means ‘good’, ‘good’ or ‘bonanza’.

Financial bonds

In the economic and financial field, the word bond usually refers to an income title (stable or variable) or to a debt title, which can be issued by public bodies (supranational, national or state) or by private companies (industrial, commercial or services).

This type of bonds is intended to facilitate the financing of a certain organization, under the commitment to return the money to investors. This means that whoever buys bonds grants a loan to the issuer, and as a creditor, he must benefit from it.

Types of financial bonds

There are several ways to classify bonds. According to the issuer, the characteristics, inflation, currency, etc. However, among the most common classifications we can recognize the following.

According to the issuer and its purpose

  • State bonds: are those issued by public bodies with the purpose of financing the national budget. For example, war bonds.
  • Corporate bonds: they are issued by private companies in order to finance their investment projects and various activities.

According to credit quality

  • Bonds with a high degree of investment: they are those that have a high credit quality, that is, a minimum risk of default.
  • High-yield bonds: refers to bonds that, in exchange for a high risk of default, offer high yields.

Other classifications

  • Simple bond, no option bonus or bullet bonus: refers to those common bonds in which the investor acts as a creditor of a company’s debt, which undertakes to pay both the amount of the investment and the accrued interest, without any other option.
  • Perpetual debt bond: this type of bond does not grant the right to reimbursement of the amount invested, but the regular payment of interest, which works as a lifetime return.
  • Zero coupon bond: refers to securities where capital and interest are settled in a single act.
  • Exchangeable bondare those bonds that can be exchanged for existing shares, without implying changes in the amount of the investment.
  • Convertible bond: those that give the holder the possibility of exchanging it for new shares at a predetermined price, varying the amount of the investment.

Labor Bonds

Labor bonds are understood as a series of financial contributions granted to workers that complement the salary. However, although they complement the monthly payment, these bonuses do not affect the calculation of labor liabilities (profits and benefits).

Types of labor bonds

  • Productivity bonuses: are economic contributions granted at the discretion of those workers who reach an outstanding level of productivity or performance, within the framework of a given period. Productivity or performance bonuses are unique acts, that is, they are punctual and not regular.
  • Food voucher: refers to a system of cards or coupons received monthly by all workers of medium and low range, intended to cover their food expenses generated by each workday.
  • Transport voucher: it is a monthly salary supplement granted to all the workers of medium and low rank to cover the transport expenses generated by their labor obligations.