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A bond is a contract the facilitates a large loan. It will set out the terms of the loan including the interest rate (coupon), repayment date (redemption) Corporate bonds relate to loans made to businesses while government bonds relate to loans made to governments.  

Wealthy individuals can invest in bonds to directly lend money to governments and big businesses. Individuals that have saved money will usually pool their savings in investment or pension funds that then invest in corporate or government bonds. The total value of debt in UK corporate and government bonds is enormous exceeds £2 trillion i.e. 2m x £1m.

Bonds are usually used to borrow very large amounts of money when it is more convenient and cost effective for an organisation to borrow from the market as a whole rather than from individual banks.

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