A bond is a contract in which an issuer undertakes to make payments to an owner or beneficiary when certain events or dates specified in the contract occur. The term has medieval origins in a system where an individual was bound over to another or to land. Subsequently, goods were put in a bonded warehouse until certain conditions (e.g. payments of taxes or tariffs) were satisfied; individuals were released from jail when a bail bond guaranteeing their appearance in court was supplied; and individuals were allowed to perform certain tasks when a surety or performance bond guaranteeing satisfaction was provided. Governments and individuals have borrowed from others since earliest recorded history, as Sumerian documents attest. Perhaps public bonds first appeared in modern form with the establishment of the Monte in Florence in 1345. Monte shares were interest bearing, negotiable, and funded by the Commune.
KeywordsInterest Rate Monetary Policy Central Bank Bond Market Rate Bond
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- Tobin, J. 1963. An essay on the principles of debt management. In Fiscal and Debt Management Policies, prepared for the Commission on Money and Credit, Englewood Cliffs, NJ: Prentice-Hall.Google Scholar