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Bond (Government and Corporate)

A bond is a debt instrument evidencing that the issuer has borrowed from the investor, with a maturity of at least one year and usually paying coupon interest at set intervals. Under Law 4749, government domestic debt securities with a maturity of one year or more are government bonds.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Worked example
  4. 4.Interpretation
  5. 5.Pitfalls
  6. 6.Official sources
  7. 7.Frequently asked questions

Key Points

  • Bonds issued by companies are private sector debt instruments subject to CMB rules.
  • Rates and bond prices move in opposite directions: when market rates rise, existing fixed-coupon bond prices fall.
  • selling before maturity can crystallise losses due to rate risk.

Formula / Calculation

Bond price = Σ Coupon / (1 + y)^t + Face value / (1 + y)^N, where y is the yield to maturity, t the coupon periods and N the maturity. Current yield = Annual coupon / Market price.

Worked Example

Illustrative

For a bond with TRY 1,000 face value paying a 30% annual coupon and one year to maturity, a rise in market rates to 35% lowers the price to 1,300 / 1.35 ≈ TRY 963. If rates fall to 25% the price rises to 1,300 / 1.25 = TRY 1,040.

The figures are hypothetical values chosen to explain the concept; they are not data for any real fund, stock or market.

Interpretation

In Türkiye fixed-coupon, CPI-linked, floating-rate and zero-coupon bonds are issued.

Rates and bond prices move in opposite directions: when market rates rise, existing fixed-coupon bond prices fall. The longer the maturity, the greater the sensitivity. Debt funds and banks are the main investors in the bond market.

Pitfalls

selling before maturity can crystallise losses due to rate risk. For corporate bonds the issuer’s ability to pay (credit risk) must be assessed separately. Some bonds trade thinly, and wide bid-ask spreads raise costs.

Official Sources

Official regulation and sources the definition is based on.

Pages Where This Term Appears

Related Terms

Frequently Asked Questions

A bond is a debt instrument evidencing that the issuer has borrowed from the investor, with a maturity of at least one year and usually paying coupon interest at set intervals.

Bond price = Σ Coupon / (1 + y)^t + Face value / (1 + y)^N, where y is the yield to maturity, t the coupon periods and N the maturity. Current yield = Annual coupon / Market price.

Prepared by: Yatırımcı.AI Research TeamLast reviewed: Method: MethodologyEditorial policy