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What is a fixed-income bond?

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Quick Answer

Fixed-income bonds are financial products that provide interest earnings over a specified amount of time. Additionally, at maturity, the bondholder receives the principal, explains the U.S. Department of the Treasury. The coupon rate is the fixed rate of interest set when the bond is issued, reports Kelly Campbell for U.S. News & World Report.

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Full Answer

The U.S. Department of the Treasury, corporations and municipalities issue fixed-income bonds and other types of investment securities to raise money, according to the U.S. Department of the Treasury. Treasury bonds have 30-year terms. Original issues are available at auction in February, May, August and September. At auction, there are also reopenings; these are types of bonds that were previously issued. Investors typically pay a different price than face value for this type of bond, states TreasuryDirect.

Investment banks underwrite corporate bonds and sell them to the public or broker-dealers, notes Morningstar. Private and public corporations issue fixed-income bonds to raise capital for building a new plant or purchasing equipment, according to the U.S. Department of the Treasury. States, counties and cities issue fixed-income bonds for general expenditures or to fund special projects, such as highways, schools or sports stadiums. Local governments and political subdivisions also issue municipal bonds. Interest payments received from municipal bonds are exempt from federal taxes.

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