Bonds Are Just Tradable Loans — But They Shape Everything

Financial Times journalist Robin Wigglesworth opens with a disarmingly simple definition: a bond is a tradable loan. Just as you can buy and sell a stock, you can buy and sell a piece of a loan. The US government issues them (treasuries), the UK issues them (gilts), Germany issues them (bunds), and so do corporations like Apple and Microsoft. Even the Church of England has issued a bond. The stock market, Wigglesworth notes, doesn't actually finance that much corporate activity — it's mostly a way for investors to cash out. When a company needs real money for a factory or a data center, it issues bonds. Over half of all debt in the world now takes the form of bonds.

Cities and municipalities also issue bonds, often through a club of banks that act as underwriters, buying the bonds and selling them to pension plans, insurance companies, and individual investors. The US municipal bond market alone is around four or five trillion dollars, much of it bought by local residents. But the bond market's sheer size — roughly $200 trillion globally — means it operates differently from stocks, and understanding those differences matters even for people who never buy a bond directly.

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