Bonds are fixed income assets that serve to represent loans typically from a government or corporate body. Bonds are commonly used by federal, state, and local governments as well as some companies receiving needed financing for operations. The individuals who purchase these bonds are essentially funding the projects these debtors are undergoing.

The bond will detail the loan amount, when it needs to be repaid, the owner of the bond, and more. When bonds hit their deadline, the issuer needs to repay the creditor. Generally, the prices of bonds react inversely to interest rates. In other words, when bond prices rise, interest rates fall and vice versa.