Talking Finance
In einer prekären Finanzsituation taucht ein Begriff immer wieder auf: die Anleihe — „bond“auf Englisch. IAN MCMASTER erklärt, was es mit diesem Finanzierungsinstrument auf sich hat.
The business of bonds
If you look at the financial section of any publication, one word will quickly jump off the page or screen: “bonds”. Bonds seem to be everywhere and come in various guises, including corporate bonds, eurobonds, coronabonds, cat bonds and, last but not least, James Bonds. OK, I made that last category up, although there has been much speculation about who will replace Daniel Craig as 007 after his final appearance, in No Time to Die, delayed until later this year.
But what exactly is a bond? It is a financial instrument issued by an organization, such as a government or company, that wants to borrow money for a particular time period (or, in the case of “perpetual bonds”, indefinitely).
In return, the organization normally promises to pay interest. Typically, the longer the money is borrowed for, and the higher the risk that part or all of the principal will not be paid back, the higher the interest rate is that has to be offered to investors. “Junk bonds” — also called “non-investment-grade” bonds or “speculative-grade bonds”— offer high yields because they have a high risk of default.
Government (or “sovereign”) bonds, in contrast, normally pay lower interest rates because the risk of default is lower. But there is a yield spread among countries: the Greek, Italian and Spanish governments currently have to pay more than the German government does.
This yield spread is the impetus behind “eurobonds” — also called “stability bonds” or, now, “coronabonds”. The idea is that the eurozone governments should pool their liability so that countries such as Greece, Italy and Spain could borrow at lower cost. Such pooling has been fiercely opposed by Austria, Denmark and the Netherlands, but the debate continues.
And what about cat bonds — or “catastrophe bonds”, to give them their full name? These are a form of reinsurance issued by insurance companies to share risk. They are high-risk and high-interest bonds that pay out to the investor in full only if an insured natural disaster — such as a hurricane — does not occur.
“Pandemic bonds” are a particular type of cat bond. They pay out to the investor in full only if a specified pandemic does not take place during a particular period. If it does, investors lose part or all of their money, which is used instead to mitigate the pandemic. For example, the World Bank raised $320 million (€294 million) with a pandemic bond in 2017. But earlier this year, investors lost $133 million (€122 million) of their principal, which will be used to finance Covid-19 healthcare in poor countries.
2. How would you say that?
Translate the following sentences.
A. There were only a few job openings and a lot of competition.