Investments in securities involve risks. The content of this website does not constitute investment advice, a recommendation or an invitation to purchase financial instruments.
Buying Bonds for the Long Term:
What to Check Before You Invest
A Practical Overview Before You Place Orders
If you are ready to buy bonds for the long term, start with five checks: issuer quality, yield, maturity, currency, and total costs. Bond prices can rise or fall, especially when market interest rates change, and issuers can default. This page shows what to compare, which documents to read, and how Partner Bank can guide you from first enquiry to custody account and first order.
What Are Bonds?
Bonds are debt securities, often called fixed-income securities. When you buy a bond, you lend a set amount to an issuer such as a government, bank, or company for a defined term. In return, the issuer usually pays interest during the term and aims to repay the nominal amount at maturity.
Many bonds can be traded on exchanges or over the counter, so you may be able to sell before maturity. But the price can rise or fall. A bond does not make you a shareholder. You are a creditor. If the issuer cannot meet its obligations, interest or repayment may fail and losses are possible.
How Do Bonds Work?
A bond is a tradable loan. The issuer sets the nominal value, coupon, maturity, currency, and repayment terms at issuance. When you buy the bond, you lend money to the issuer and usually receive coupon payments during the term. At maturity, the issuer aims to repay the nominal value. If you sell earlier, your result depends on the market price at the time of sale.
Example for illustration only:
€100 nominal, 5% coupon, 5-year term. You receive €5 per year. If the issuer meets its obligations, €100 is repaid at maturity.
What to Understand Before You Invest:
Purchase and pricing
Buy Bonds: Step by Step
Request a Consultation
Start with a conversation about your investment amount, time horizon, and whether you are looking for a direct bond purchase or a more diversified way to invest in bonds. At Partner Bank, you can discuss different ways to gain bond exposure, including individual securities as well as Funds and ETFs from selected third-party providers.
Open a Custody Account
To buy bonds, you usually need a securities custody account with a bank or broker. During account opening, requirements, necessary details, costs, custody, and the next steps can be clarified. This helps you understand which steps matter before a possible order and how access to securities generally works.
Place Your First Order
Once the custody account is active, you can select a bond, bond fund, or ETF and place an order. Before buying, review the issuer, maturity, coupon, yield, currency, rating if available, and full costs, including fees, spreads, and accrued interest. Product documents and pricing details help you assess the order.
What Types of Bonds Are There?
Bonds can be grouped by issuer and by how interest and repayment work. The examples below are common structures investors may come across when they buy bonds for the long term.
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Government BondsIssued by states or public-sector entities to raise capital. Risk and yield often depend on the issuer’s credit quality, currency, and maturity. |
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Corporate BondsIssued by companies instead of taking a bank loan. Coupons and prices usually reflect the company’s creditworthiness and can change with business and market conditions. |
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Covered BondsIssued mainly by banks and backed by defined collateral pools, such as mortgages or public-sector loans. Terms and structure can differ by issuer and jurisdiction. |
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Fixed and Variable Rate BondsFixed-rate bonds pay a set coupon until maturity. Floating-rate bonds reset the coupon at defined intervals based on a reference rate, sometimes with caps or floors. |
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Zero-Coupon and Inflation-Linked BondsZero-coupon bonds pay no periodic interest and are usually issued below nominal value, with repayment at maturity. Inflation-linked bonds tie coupon and or repayment to an inflation index, which can change outcomes when inflation shifts. |
What Are the Main Risks of Bonds?
Bonds can provide defined interest and repayment terms, but they also involve investment risks. Their value and expected payments can be affected by interest rates, the issuer’s financial position, inflation, currency movements, and market liquidity. These risks should be understood before investing.
- Interest-Rate RiskBond prices can fall when market interest rates rise, especially for fixed-rate bonds with longer maturities. If the bond is sold before maturity, the investor may receive less than the purchase price and realise a loss.
- Credit and Default RiskBond payments depend on the issuer’s ability to meet its obligations. If the issuer’s financial position weakens or it defaults, interest or principal may not be paid in full, and investors may lose part or all of their invested capital.
- Inflation RiskInflation can reduce the real value of fixed interest payments and the amount repaid at maturity. If prices rise faster than the income generated by the bond, the purchasing power of the interest and returned capital can decline over time.
- Currency RiskBonds issued in a foreign currency can be affected by exchange-rate movements. Even if the bond performs as expected, an unfavourable currency move can reduce the value of interest payments or the amount repaid when converted into euros.
- Liquidity RiskSome bonds may be difficult to sell quickly because trading activity is limited. If there are only a few buyers, an investor may need to accept a lower price or wait longer to sell, particularly during periods of market stress.
Bonds as an Investment for Long-Term Planning
Bonds are often used to add structure to a long-term portfolio because they have defined terms, interest mechanics, and a maturity date. But bonds are securities, and their prices can rise or fall. Your result depends on interest rates, issuer credit quality, costs, and whether you hold to maturity or sell earlier. If you want to place bonds in a broader context, learn more about Investment Products.
If you prefer diversified exposure instead of selecting a single issuer yourself, you can also invest through bond funds or bond ETFs, either as a one-time investment or through regular contributions. That can suit buyers who want bond exposure but prefer a broader spread across many securities.
If you want to move from research to action, a consultation can help you compare direct bonds, bond funds, and bond ETFs based on amount, time horizon, and how actively you want to manage the position.
Investing in Bonds with Partner Bank
In a consultation with Partner Bank, bond-related investment options can be reviewed in relation to your goals, time horizon, liquidity needs, and risk tolerance. This can help clarify how different bond investment approaches may fit within your wider investment portfolio.
What Can Be Discussed in a Consultation
1. Your investment goals
The conversation can help clarify what role bonds may have in relation to your broader financial goals and existing investments.
2. Your time horizon
Different bond maturities can behave differently over time, so the intended investment period is an important part of the discussion.
Bonds, One of Your Investment Options with Partner Bank
Fixed or Variable Interest Payments
Many bonds define a coupon that is paid on a set schedule. The coupon can be fixed, variable, or linked to a reference rate, depending on the bond terms and the issuer.
Trading Bonds on the Market
Bonds are often tradable on exchanges or over the counter, which may allow you to buy or sell during the term. Liquidity and pricing can vary by issuer, maturity, and market conditions.
Repayment at Maturity
Bonds usually define repayment of the nominal value at maturity in the issue terms. Repayment and interest depend on the issuer meeting its obligations, and losses remain possible.
Frequently Asked Questions
1. What does it mean to buy bonds?
When you buy a bond, you lend money to an issuer such as a government, bank, or company for a defined term. In return, the issuer usually pays interest and aims to repay the nominal amount at maturity. Bonds can also be traded before maturity, which can change your results.
2. How do bonds generate returns?
Bond results usually come from two sources: coupon payments and price changes. If you sell before maturity, the market price at the time of sale matters. If you hold to maturity, repayment is usually based on nominal value, assuming the issuer meets its obligations.
3. What is the difference between coupon and yield?
The coupon is the stated interest rate applied to the nominal value. Yield reflects the price you pay, the remaining term, and the expected cash flows, together with costs. If you buy above 100% of nominal value, the yield can be lower than the coupon. If you buy below par, the yield can be higher.
4. What risks should long-term investors consider?
Common risks include interest-rate risk, issuer credit risk, liquidity risk, currency risk for non-EUR bonds, and inflation risk. Longer maturities may react more strongly to market-rate changes. Losses are possible.
5. What costs can apply when buying bonds?
Common cost components include bid-ask spreads, trading or brokerage fees, custody account fees, and in some cases accrued interest when buying between coupon dates. Total cost depends on the provider, the trading venue, and the specific bond.
6. Do I need a custody account to buy bonds?
In most cases, yes. Bonds are usually bought and held through a securities custody account. This is also where settlement, reporting, and position statements are handled.
7. What happens if I sell a bond before maturity?
Your result depends on the market price at the time of sale. If rates have risen or credit conditions have worsened, the bond price may be below your purchase price. If rates have fallen or the bond is in stronger demand, the price may be higher.
8. Should I buy a single bond or a bond fund or ETF?
A single bond gives you direct exposure to one issuer and one maturity date. A bond fund or ETF spreads exposure across many securities, but its market price can still move and it usually does not have one fixed maturity date. The better fit depends on your amount, time horizon, and how closely you want to follow the position.
Schedule a Conversation About Bonds
A conversation with a Partner Bank advisor can help you discuss your questions about bonds, possible alternatives, costs, and risks in a calm setting. Together, you can clarify what the next steps may look like and which points could be relevant to your situation before a possible next step.
 | Risk & Legal Notice |
Investments in securities involve risks. The content of this website does not constitute investment advice, a recommendation or an invitation to purchase financial instruments.