Why are bonds known as fixed income investments?

Why are bonds known as fixed income investments?In our Fixed Income Bonds jobs section, you can find all the newest fixed income trading jobs posted by recruiters and bond investments firms in London and in the U.K, if you already have (or to get yourself) some work understanding of how fixed income trading works.

Many people interested in the sector, still ask us basic FAQs, like for example “Why are bonds known as fixed income investments?”

A fixed-income security is an investment that provides fixed periodic payments as a return and the eventual return of principal at maturity. Unlike a variable-income security, where payments change based on some underlying measure such as short-term interest rates, you will know in advance the payments of a fixed-income security.

A fixed-income security is commonly referred to as a bond or money market security and it is a loan made by an investor to a government or corporate borrower. When a corporation wants to raise financing, it can do so by either issuing debt or equity. When it issues debt in the form of bonds, it borrows money from a lender, and in return, makes a contractual agreement to repay the principal as well as interest over the course of the loan.  The borrower, or issuer, promises to pay a set amount of interest, called the coupon, on a predetermined basis until a set date. The issuer returns the principal amount, also called the face or par value, to the investor on the maturity date.

Corporate bonds are issued by companies and are more likely than other corporate investments to be repaid if a company declares bankruptcy. Municipal bonds are issued by states, their agencies and subdivisions. These fixed-income securities generate regular income, reduce overall risk, protect against volatility of a portfolio and offer more stability of principal than other investments.

A performance bond is a type of contract surety bond. Surety bonds are financial guarantees provided by insurance companies. In short, a performance bond guarantees to a project owner that a project will be completed (performed), even if the contractor fails.

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