these instruments represent widely used funding tools for Corporates, Municipals and Governments that are acknowledged Issuers of the Debt on capital markets and are widelly recognized as Bonds. These types of Securities are issued at certain face value, have fixed maturity date and bear certain Yield (e.g. 2,55% p.a. in case of fix, or a float or even zero-coupon may be applied). This is the main contrast to Shares, which market price is much more volatile and Dividend income is depending on financial performance of Issuer (so that it is not guaranteed). Bonds and Shares represent the most usual alternative for Investors on capital markets, while the first one investment asset is considered as “safe” one, while the latter one is deemed as more risky given the historical volatility of stocks, in general. Therefore there is common relation between these assets that when Bonds fall, the Stocks rise and vice versa. Further, as concerns Bonds, their market price usually falls, when the Yields rise and vice versa. This is reflecting the simple logic that increasing Yields are indicating lower interest from Investors, so that the credibility of Issuer has meanwhile lowered.

In comparison to standard credit contracts, these instruments are very liquid so that each Investor (Creditor) can easily dispose the investment if needed and sell it on the market. On the other hand, Debt papers are usually unsecured and free of any complicated covenants or financial ratios, so the Issuer is expected to come up with solid rating/creditworthiness which equals to investment grade. This rating assessment should provide good comfort of lower probability of Issuer default. In addition, the loan contract is replaced with Issuance protocol/prospect, which has to be registered/approved by local regulator or capital market coordinator to secure that it contains standardized structure. Given the fact, that these papers are traded on open market, the Issuer needs to keep stable financial performance to avoid any rating adjustments (down-grade), that could negatively affect the market price of such instrument. The pricing on Bonds also differs very much from usual credit transactions, as instead of regular interest rate there are used various types of Yields, which are derived from total returns from papers compared with similar market instruments (same rating, tenor etc.).