Finschool By 5paisa

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A bond with a face value of less than $1,000 is referred to as a baby bond.

Ordinary investors who might not have big sums to invest in regular bonds are targeted by these small-denomination bonds. Municipal issuers or the government may offer baby bonds or savings bonds.

Municipalities, counties, and states typically issue baby bonds to finance pricey capital improvements and infrastructure projects. These zero-coupon municipal bonds with tax exemptions typically have a term of between eight and fifteen years. In the bond market, Muni bonds are often rated A or higher.

Businesses can offer baby bonds as corporate bonds as well. Utilities, investment banks, telecoms, and business development organizations (BDCs) that provide financing for small- and medium-sized firms are some of the corporate issuers of these debt securities. The issuer’s financial standing, credit score, and readily accessible market data all affect the price of corporate bonds.

Baby bonds can be issued by a business to increase demand and liquidity if it cannot or does not want to make a significant debt issuance. A business may also issue baby bonds to draw in small or retail investors who might not have the resources to buy the more common $1,000 par value bond.


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