Bonds are considered one of the main sources of funding used by holding companies and government institutions to finance

their various activities. They are a type of security that plays an important role in modern economies. They are also considered a product

with a fixed income that provides a way for various government bodies and economic institutions to raise long-term funds. Although

there are many types, all bonds work in the same basic way. Given their significant importance across all

المجالات الاقتصادية المختلفة؛ سنناقش في السطور التالية أنواع السندات المالية ومخاطرها.

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Definition of Financial Bonds

Bonds are a financing instrument used by governments and their various agencies, as well as economic institutions and companies;

to raise funds to finance their various projects and activities. In other words, they are a written agreement by the borrower (the “issuer”)

to pay a specified amount of money (the “par value”) to the holder on a specified date, along with the interest due on that amount on

specific. Another meaning of a bond is a security representing a portion of debt owed by the issuer, whether a government or a company, when

It borrows from the public.

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Types of Bonds

A bondholder receives periodic returns as a percentage of the bond’s value, regardless of whether the issuer makes a profit. However, the holder is not entitled to

vote on company shareholder meeting resolutions. For example, suppose you buy a bond worth $10,000 with a 10-year term

and an annual interest rate of 10%. What does that mean? It means that at the end of each year, the bond issuer will pay you the interest

due, amounting to $1,000. At the end of the bond’s term—the 10 years—you will get the full bond value of $10,000 back.

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Bonds by Issuer

By issuer, bonds are generally classified into public bonds, which are issued by the public treasury as loans

The government is the borrower, while its creditors are banks and public- or private-sector companies. These bonds are intended to strengthen the ability

to weather economic crises, particularly during periods of inflation.

The second type is corporate bonds, issued by joint-stock companies to raise the funds needed to finance

their projects instead of issuing new shares.

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Bonds by the Rights and Privileges Offered to Their Holders

By repayment method, bonds include convertible bonds, which can be converted into ordinary shares

if the investor chooses, and premium bonds, which entitle their holder to compensation exceeding the issue price.

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Bonds by Rate of Return

Bonds are divided into two types based on their return rate. The first is fixed-rate bonds, which provide the same return each year

until the end of the loan term. These bonds are especially popular when bank interest rates are low.

The second type is floating-rate bonds, whose interest rate changes in line with the prevailing market rate

or the inflation rate.

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Bonds by Payment Method

By repayment method, bonds include those repaid on their maturity date, when the issuing entity pays bondholders what they are owed,

and those repaid before maturity, with the aim of reducing the company’s debt and refinancing

Bondholders’ rights.

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Bonds by What the Company Achieves

This type of bond includes ordinary bonds, which are unaffected by the company’s operating results, and income bonds, which

are affected by the scale of operations and the company’s results. Investors are not entitled to claim interest for any year in which the

company does not make a profit.

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Bonds by Collateral

Bonds are divided into two types based on the guarantees provided. The first type is secured bonds, which are intended to attract capital; companies

provide tangible assets as collateral to repay loans. The second type is unsecured bonds, for which the guarantee takes priority

It has priority over the issuer’s other creditors, making it riskier than secured bonds.

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مخاطر السندات

Although all types of bonds are considered less risky than stocks because they provide regular income and

bondholders have priority over shareholders in recovering their claims if the company goes bankrupt, bonds still carry other risks,

such as market risk, which can involve fluctuations in interest rates and inflation. Bond prices may lag behind rising

prices for years to come. Inflation-linked or index-linked bonds are available for such circumstances.

There are also credit risks. This is one of the rare cases in which a government chooses to default on its debt.

In its local currency, along with demand risk—namely, reduced demand for bonds, making them difficult to sell when needed.