A bond is a financial instrument of indebtedness, or the loan of principal by one party (the purchaser) to another (the seller) for an agreed return at some point in the future (usually a greater amount, representing principal plus interest or return on that investment).

Because they are debt instruments rather than instruments of equity, bonds lose their appeal as the seller's creditability diminishes, such that most bonds are only issued by governments, banks and other large institutions.

Bonds tend to offer a lower rate of return than equities in favourable economic times, but become increasingly popular during recessions and financial crises when economic uncertainties prevail. Bonds are commonly seen as a viable hedge in a deflationary environment.

Like all investments however, bonds do carry various risks including total loss. Whether or not bonds are a suitable investment in one's circumstances is a question requiring expert financial advice.

This web site provides general information only and does not advise or recommend bonds. Three sites with further information on the topic of bonds are MoneySmart.gov.au, Savings.com.au and Finder.com.au.