the following explains the more common bonds, and is not meant to be exhaustive...

1. Bonds are basically borrowings by entities, either government, or private business. Ie, the borrowing entity is the issuer of the bond, and the buyer is the creditor of the entity....

2. they are generally unsecured, and hence pose some risks....the buyer hopes that the issuer will pay the "interests" and eventually, the capital sum as well...therefore, how attractive the bod is depends on the yield...and the yield depends on how creditworthy the issuer is, and the prevailing economic conditions...for high rated governments and companies, they will have high ratings (eg AAA, AAa) and can borrow money with low "interests". ..for lower rated entities, they will need to give higher "yields" to attract buyers...

3. The bond will have a coupon rate usually, which is the fixed "interest" that the issuer promises to pay the buyer, based on the par value...this is either paid yearly, or half yearly or quarterly....high grade bonds may only have coupons of 3% or less...whereas BBB and lower bonds (junk bonds) will have coupons of 5-8%....

4. bonds are freely traded in the secondary market, and the price will fluctuate...it can be above the par value (premium) or below (discount)...

5. it can have a tenure, or be perpetual (ie forever!)...the tenure may be a few years to 30-40 years...for long term bonds, they often have a callable date, say 10 years into the bond, where the issuer has the option to call in the bond and pay up the buyers (lenders)...

6. the actual yield depends on the traded price of the bond....eg, say a bond (par RM1) is traded at 1.05 with a coupon on 7%...the yield is 1/1.05 x 7 = 6.7%....on the other hand, one trading at 0.95 will have a yield of 1.0/0.95 x7 =7.37%...

7. there is a generally inverse correlation with interest rates....as interests rates drop, the bond price will increase....eg, the pbf bond is now trading at about 1.12, on a coupon rate of 7.5% yielding 6.7% return...still higher than FD or money market instruments...at one point it was trading at a premium of 1.22, still yielding a respectable 6.1%....hence people will still buy at that price...

8. traded price will always move towards par as the call date, or maturity date approaches....because the issuer will only pay par value at call/maturity...

8. you can gear to buy bonds...if the coupon rate is significantly above borrowing rate....so say, if your coupon is 7.5%, and interest on borrowing is 5%, you still have an arbitrage margin on 2.5% returns....gearing allowed will depend on the rating of the bond, and can be 50-70% of the total investment amount...this gearing is especially useful if you buy bonds in low interest currency...eg, usd have less than 1% interest (although the investment bank lending you normally charge 2.4-2.6%...so eg, for a bond coupon rated 5%, and borrowing 70%, your real yield can be close to 10%...

9. finally, the bad news...there is no "retail" sale of bonds in msia, and you will need to go through investment banks, and involves large sums of money...for local bonds, minimum is 250K....for usd bonds it's usd200K...