Investing
Bonds & Fixed Income
Learn how bonds work, why investors use them, and why fixed income still involves risk.
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Bonds in 30 seconds
A bond generally represents money lent by an investor to a government, corporation, or other issuer. The issuer agrees to make payments according to the bond’s terms.
Bond vocabulary
Four key bond terms
Principal / face value
The amount associated with the bond’s repayment terms.
Coupon / interest
The bond’s stated interest-payment terms; some bonds have different payment structures.
Maturity
The date when principal repayment is scheduled according to the terms.
Issuer
The government, corporation, or other organization borrowing the money.
Simplified illustration
Bond prices can change
Market rates ↑
An existing lower-rate bond may become less attractive, so its market price may fall.
Market rates ↓
An existing higher-rate bond may become more attractive, so its market price may rise.
This describes the general inverse relationship. Price sensitivity depends on the bond’s terms and other factors.
Not guaranteed
Bond risks
Interest-rate risk
Market prices can change when interest rates change.
Credit / default risk
An issuer may fail to make required interest or principal payments.
Inflation risk
Fixed payments may lose purchasing power over time.
Liquidity risk
Some bonds can be difficult to sell quickly at a desired price.
Who borrows?
Government versus corporate bonds
Government bonds
Issued by federal, provincial, municipal, or other governments.
Corporate bonds
Issued by companies to borrow money.
Issuers can have different credit risks, terms, and yields. The label alone does not replace reviewing the specific bond.
Potential roles
Why people use bonds
Income
Some bonds provide scheduled interest payments.
Diversification
Fixed income may behave differently from equities, though diversification cannot prevent every loss.
Volatility management
Some bonds may fluctuate less than some equities; risk varies widely.
Capital-preservation goals
Certain products and maturities may be considered where repayment timing matters, subject to issuer and market risk.
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Sources & last reviewed
Official references
- Last reviewed
- August 2026
- Primary sources
- Ontario Securities Commission and Canadian Securities Administrators