In financial terms, a bond is a debt security, in which the issuer owes the holders a debt and is obliged to pay them interest (the coupon) and principal at a later date, termed the maturity date. Bonds are used by companies, municipalities, and governments to raise capital and finance their operations.
Investors buy bonds as a way to preserve capital and generate income, since the interest rates on most bonds are higher than the rate of inflation. There are many different types of bonds, including corporate bonds, municipal bonds, and government bonds.