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Debt Instruments

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Treasury Bills (T-Bills)

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Short-term debt securities issued by the government to finance operations. Example: Used to manage short-term liquidity needs of the government.

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Treasury Bonds (T-Bonds)

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Long-term, fixed-interest government debt securities with a maturity of more than ten years. Example: Used to finance long-term government projects or manage deficits.

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Treasury Notes (T-Notes)

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Medium-term debt instruments issued by a government with fixed interest rates and maturities typically ranging from 2 to 10 years. Example: Used for various government fundings, such as infrastructure.

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Corporate Bonds

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Debt securities issued by corporations to raise capital, paid back with interest over time. Example: A company might issue bonds to finance a new plant or equipment.

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Municipal Bonds

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Bonds issued by states, municipalities or counties to finance public projects. Example: Used to build schools, highways, or sewage systems.

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Savings Bonds

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Non-marketable, interest-bearing U.S. government bonds designed to save money over the long term. Example: Series EE bonds used as a gift to encourage savings.

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Certificate of Deposit (CD)

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A savings certificate with a fixed interest rate and maturity date issued by a bank. Example: Individuals use CDs for low-risk, interest-earning savings.

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Commercial Paper

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An unsecured, short-term debt instrument issued by a corporation, typically for financing accounts receivable and inventories. Example: Companies might issue commercial paper to cover short-term liabilities.

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Junk Bonds

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High-risk, high-yield bonds issued by companies or governments with lower credit ratings. Example: Often used by companies looking to finance acquisitions or turnaround efforts.

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Convertible Bonds

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Corporate bonds that can be converted into a predetermined number of the company's shares. Example: A way for companies to raise capital with the potential for reduced interest cost if the bonds are converted.

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Zero-Coupon Bonds

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A bond issued at a discount and redeemed for full face value at maturity. Example: Investors might choose these to preserve capital for a future expense like a child's education.

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Sovereign Bonds

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Debt securities issued by a national government in a foreign currency. Example: A means for governments to borrow in currencies more stable than their own.

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Agency Bonds

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Securities issued by government-affiliated organizations to fund their operations. Example: Federal agencies like Freddie Mac issuing bonds to finance mortgages.

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Asset-Backed Securities (ABS)

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Bonds or notes backed by financial assets. Example: Mortgage-backed securities (MBS), which are secured by mortgages on real properties.

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Collateralized Debt Obligations (CDOs)

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Complex structured finance product backed by a pool of loans and other assets. Example: Bundled diverse debt such as mortgages, loans, and bonds to sell to investors.

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Inflation-Linked Bonds

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Government bonds where the principal and interest payments adjust according to inflation. Example: Treasury Inflation-Protected Securities (TIPS) in the U.S.

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Build America Bonds

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Taxable municipal bonds that feature tax credits and federal subsidies for the bond issuer. Example: Used to finance public infrastructure projects.

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Eurobonds

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International bonds that are denominated in a currency not native to the country where it is issued. Example: An American corporation might issue Eurobonds in Euros to raise capital in European markets.

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Fixed-Rate Bonds

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Bonds that pay the same interest rate for their entire term. Example: Used by investors who require predictable income and can be issued by governments or corporations.

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Floating-Rate Bonds

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Securities with variable interest rates that adjust periodically to reflect market conditions. Example: Attractive to investors when interest rates are expected to rise.

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Income Bonds

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Bonds that only pay interest if the issuing entity has sufficient earnings to cover the coupon payments. Example: Often issued by companies in reorganization or financial difficulty.

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Perpetual Bonds

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Bonds with no maturity date. Interest is paid indefinitely. Example: Used by the British government in the past, known as consols.

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Revenue Bonds

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Municipal bonds repaid from the revenue generated by the project financed by the bond issuance. Example: Tolls from a highway or fees from a hospital.

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Subordinated Debentures

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A type of debt instrument that is paid after all other corporate debts and loans are repaid, in case of liquidation. Example: Issued by companies for acquisitions or growth, usually with higher interest rates.

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War Bonds

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Debt securities issued by a government to finance military operations during times of war. Example: Issued by the U.S. government during World War II to support the war effort.

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Bearer Bonds

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Physical bond certificates that are owned by the holder or bearer, rather than registered to a specific owner. Example: Used in the past for anonymous transfer, but now largely obsolete due to security concerns.

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Catastrophe Bonds (Cat Bonds)

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High-yield debt instruments that are designed to raise money in case of a catastrophic event such as a natural disaster. Example: Used by insurance companies to transfer the risk to investors.

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Green Bonds

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Bonds issued to finance environmentally friendly projects. Example: Used by companies or governments to fund renewable energy projects or efficient building construction.

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