Define: Bond

UK Accounting Glossary

Definition: Bond

Quick Summary of Bond

The name sometimes given to loan finance (more commonly in the USA).

What is the dictionary definition of Bond?

Dictionary Definition

  1. legal Evidence of long-term debt, by which the bond issuer (the borrower) is obliged to pay interest when due, and repay the principal at maturity, as specified on the face of the bond certificate. The rights of the holder are specified in the bond indenture, which contains the legal terms and conditions under which the bond was issued. Bonds are available in two forms: registered bonds, and bearer bonds.
  2. finance A documentary obligation to pay a sum or to perform a contract; a debenture.
  3. A physical connection which binds, a band; often plural.

In finance, a bond is an instrument of indebtedness of the bond issuer to the holders.

The bond acts is a debt security, under which the issuer owes the holders a debt and (dependant upon the terms of the bond) is obliged to pay them interest (the coupon) or to repay the principal at a later date, termed the maturity date.


Full Definition of Bond

In finance and economics, a bond or debenture is a debt instrument that obligates the issuer to pay to the bondholder the principal (the original amount of the loan) plus interest.

Thus, a bond is essentially an I.O.U. (I owe you contract) issued by a private or governmental corporation.

The corporation “borrows” the face amount of the bond from its buyer, pays interest on that debt while it is outstanding, and then “redeems” the bond by paying back the debt.

A mortgage is a bond secured by real estate.


Bond FAQ's

What are government bonds in economics?

A government bond is a debt security issued by a government to support government spending. Government bonds can pay periodic interest payments called coupon payments. Government bonds are considered low-risk investments since the government backs them.

Why are bonds cheaper than loans?

Bond financing is typically cheaper than loan financing because the investors’ risk is mitigated by market liquidity. To put it another way, it’s easier to sell a bond than it is to sell a loan, thus an investor will accept a slightly lower yield in exchange for this flexibility.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Bond. Payroll & Accounting Heaven Ltd. September 16, 2019
Chicago Manual of Style (CMS):
Bond. Payroll & Accounting Heaven Ltd. (accessed: September 16, 2019).
American Psychological Association (APA):
Bond. Retrieved September 16, 2019, from website:

Definition Sources

Definitions for Bond are sourced/syndicated from:

This glossary post was last updated: 23rd December 2018.