What is a bond?
A bond is a debt security: by buying it, you lend money to an issuer (government, local authority, company). In return, the issuer usually pays periodic interest — the coupon — and undertakes to repay the face value on a set date, the maturity.
Why its price changes
Between issue and maturity, a listed bond trades at a fluctuating price. When market interest rates rise, the price of bonds already issued tends to fall, and vice versa. How the market perceives the issuer's soundness also affects the price.
Key takeaway
Risks
The main risk is default: the issuer stops paying coupons or does not repay the face value. There is also interest-rate risk, liquidity risk (difficulty selling) and, for a bond denominated in another currency, currency risk.
Attention
How to hold bonds
Bonds can be held directly in a brokerage account, or indirectly through bond funds or ETFs — and, in practice, through a euro fund, which is largely invested in bonds.