Bond Basics: Issue Size and Date, Maturity Value, Coupon
You can add bonds to your investment portfolio to provide stability. That’s because bonds are known to be safe investments. When you invest in bonds, you’re getting a steady stream of income in times when your stocks may perform poorly. Bonds are a great way to protect your savings when you don’t want to put your assets at risk.
Key Features of Bonds
Most bonds have five features when they are issued: issue size, issue date, maturity date, maturity value, and coupon. Once bonds are issued, the sixth feature appears, which is yield to maturity. This becomes the most important figure for estimating the total yield you will receive by the time the bond matures.
Issue Size and Date
The issue date is simply the date on which a bond is issued and begins to accrue interest. The issue size of a bond offering is the number of bonds issued multiplied by the face value.
For instance, suppose an entity issues two million bonds with a $100 face value. That means the issue size is $200 million dollars. The issue size reflects the borrowing needs of the entity issuing the bonds. It also shows the market’s demand for the bond at a yield that’s acceptable to the issuer.
Maturity Date and Value
The maturity date is the date on which you can expect to have your principal repaid. It is possible to buy and sell a bond in the open market prior to its maturity date. Keep in mind that this changes the amount of money the issuer will pay you as the bondholder based on the current market price of the bond.
Bonds trade on the open market from their date of issuance until their maturity. That means their market value will typically be different from their maturity value.