i know this is a broad topic so some leading questions would be
how is price determined
what is maturity
what are different types of bonds
how does the government use the money
Analogies make explanations a lot easier, for I am not smart.
In: Economics
A bond is just a nation, bank, company, or whomever asking the open market for loans. They agree to pay you back at a sent time, with a set rate of interest.
So a 1-year $10,000 bond at 1% means you give them $10,000. Then, a year later, they give you $10,100. Plus or minus some depending on the terms and details of the loan.
“Maturity” is how long until the loan is over.
The price, which is really just the rate, goes up and down depending on how many people buy the bonds and how much the nation, bank, company needs the loan. If they REALLY need the loan, the price goes up. If everyone is clambering to buy bonds (like in a crashing market), the price goes down.
There ARE different types of bonds…. but I’m not that smart. But they’re really just loans.
(And the FED buying bonds is a little different, because they literally never run out of money. When the US FED, the central bank, buy bonds they’re summoning money from nowhere. Colloquially called “printing money”. It devalues all the other money in the system. Buuuuut they only do this when everything crashes and becomes worthless. So the worthless stocks are now the same price as the worthless money. Wheee stability)
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