In general, bonds could be considered one of the central elements of the modern society and business environment as they provide funds needed to organize a particular venture and guarantee its development. However, as it has already been stated, bonds are traditionally associated with multiple risks and financial problems that might appear if borrowers are not able to pay (“Types of bonds,” n.d.). For this reason, issuers try to use services of particular agencies that monitor the financial state of all agents involved in this sort of relations and minimize risks that are traditionally associated with bonds and their repayment.
The given system also presupposes that customers who are characterized by agencies as those who have not good credit history should pay more for a loan. It seems quite logic and demonstrates the fundamental peculiarities of the modern banking system, and the way bonds work. Financial institutions cannot exclude individuals with not ideal credit history from the banking environment (ET Bureau, 2017). Moreover, they could still bring benefits to banks. However, considering it a risky affair, issuers want some guarantees to minimize their hypothetical losses.
Finally, low-rated bonds could still provide numerous opportunities for a clever investor which realizes the existing trends in the market and the tendencies that affect the sphere. In such a way, the risky character of a suggested bond might be used to acquire additional income and ensure that no other agent will interfere in the deal (ET Bureau, 2017).
Altogether, bonds play a critical role in the modern society and business world as they are used by companies or individuals to create the basis for their financial stability. However, the risky character of this phenomenon introduces the need for particular security measures.
References
ET Bureau. (2017). Nature of bonds to decide impact on fiscal deficit.The Economic Times. Web.
Types of bonds. (n.d.). In Investopedia. Web.