What Are Bond Investments?
What are bond investments, and why are they essential to balancing and stabilizing one’s portfolio? Discover how bonds help protect from market volatility.
Insights and blogs
Nov 04, 2025
Building wealth is not just about chasing high returns; it is also about creating stability, protecting capital, and ensuring you can achieve your long-term financial goals. This is where bonds come in.
When people look into investing, stocks and mutual funds are usually top-of-mind. But bonds deserve attention, too. They deliver steady income, help manage risk, and bring balance when markets swing. If you want a portfolio that grows with fewer surprises, it’s important to learn how bond investments work.
What is a Bond?
A bond is a financial agreement. When you buy one, you are lending money to a government, a corporation, or another entity. In return, the issuer agrees to pay you interest at fixed intervals and return your initial investment—called the principal—when the bond matures.
You can think of it as an investment scheme that works like a loan in reverse. Instead of you borrowing from a bank, you are the lender. The terms of the bond outline how much interest you will receive, how often payments will be made, and the exact date your money will be returned.
There are several types of bonds:
Government Bonds
A common type of bond investment in the Philippines is government bonds. These are debt securities issued by the government to raise funds for public projects and infrastructure. They are considered low-risk since the government backs them. These include:
- Treasury Bills (T-Bills). Short-term bonds that mature in one year or less. They are sold at a discount and pay the full face value when they mature.
- Fixed Rate Treasury Notes (FXTNs). Medium to long-term bonds with a fixed interest rate, usually maturing between 2 and 23 years. They pay interest twice a year.
- Retail Treasury Bonds (RTBs). These are designed for individual investors, with tenures ranging from medium to long, typically 3 to 25 years. RTBs pay interest quarterly and can be bought with relatively low minimum amounts.
Corporate Bonds
Private companies issue corporate bonds to raise capital to fund growth, expansion, or operations. They tend to offer higher interest rates than government bonds but come with higher risk because they depend on the company’s financial health. Corporate bonds typically pay interest regularly until maturity.
Bonds operate on a simple principle. Here is how the process looks in practice:
1. Issuance
A government or company needs funding and issues bonds to raise money. Instead of taking a bank loan, they tap into investors who are willing to lend in exchange for steady returns. The terms of the bond set the interest rate, payment schedule, and maturity date.
2. Purchase
Once bonds are issued, investors can buy them directly during the offering period or later in the secondary market. Bonds are typically sold at face value, also known as par value, though market conditions may cause the price to be slightly higher or lower. Buying a bond means committing capital for a set time in exchange for predictable income.
3. Income
The primary benefit of a bond investment is regular interest payments, known as coupons. Coupons are made on a fixed schedule, usually every six months or once a year. They are calculated as a set percentage of the bond’s original value. This consistent income stream makes bonds appealing for investors seeking stability.
4. Maturity
The maturity date is the end of the bond’s term when the issuer is obligated to repay the full principal amount to the investor. Maturity can range from a few months to several decades, depending on the type of bond.
Let’s put this into an example. Suppose you invest PHP 100,000 in a government bond with a 5% annual coupon and a maturity of five years. Each year, you will receive PHP 5,000 in interest. At the end of the five years, you get your original PHP 100,000 back.
Bond prices can change even when interest payments are steady. When market interest rates go up, the price of older bonds with lower interest rates falls. When rates go down, bonds with higher interest rates become more valuable, causing their prices to rise. But if you plan to keep the bond until it matures, these price changes won’t affect how much money you get in the end.
What Are Bonds in Investment?
So, what is a bond investment? It all comes down to lending money in exchange for a predictable interest rate. When the bond reaches its maturity date, you get back the original amount, known as the principal or face value.
Bonds are a way to earn a steady income and can be safer than stocks because they offer fixed interest payments and a promise to return your original investment. That income can be used to cover expenses, reinvest, or save for future goals.
You can invest in bonds through the following channels:
- Retail Treasury Bonds during public offerings
- Corporate bonds through banks or licensed brokers
- Fixed-income investment funds of unit investment trust funds (UITFs) that pool money into a diversified portfolio of bonds
Benefits of Bond Investments
Why are bonds a good investment for long-term financial planning? Here are the reasons:
Predictable Income
Bonds pay interest on a fixed schedule, giving you a reliable cash flow. This consistency makes them ideal for individuals seeking a steady income, whether for retirement or other recurring expenses. Bonds become a passive investment when you choose to buy bonds and hold them until they mature. With this approach, you focus on earning a predictable income rather than trading.
Capital Preservation
When you hold a bond until maturity, you get your full principal back (assuming the issuer does not default). This makes bonds helpful in preserving capital, especially if you are saving for time-bound goals, like a home purchase or education.
Compounding Potential
Reinvesting the interest payments you receive enables you to create compounding growth. Over time, even modest returns can add up significantly when income generates more income.
Flexibility
Bonds can be tailored to your needs. If you want quick access, you can choose short-term issues. If you are planning for the long term, longer-dated bonds provide stability and steady returns over many years.
The strongest case for bond investment is its role in building a balanced and diversified portfolio. Some investors avoid diversification because they fear risk, lack confidence, or simply don’t have access to the right information. They might put all their money into a single asset class, believing it is safer or easier to manage.
By including bonds alongside stocks or savings, you spread your investments across different asset types, which helps reduce overall risk. Bonds offer a dependable option for both new and experienced investors aiming to stabilize their portfolios.
The local market offers a range of options, from government retail bonds to corporate bonds issued by reputable companies. This variety allows you to select safe and rewarding investments that align with your financial goals and risk tolerance.
Check out the top 30 bonds in the Philippines so you can identify issuers that fit your investment strategy.
Build a Stronger Portfolio Today with Bonds
Bonds provide a cushion against volatility. They bring balance, stability, and protection, and a steady income so you can meet your goals without unnecessary risk. Bonds are the anchor that keeps you on track, no matter how the markets move.
Start investing in bonds today to secure your financial future.
Discover More Banking and Financial Tips
How to Pay Your Credit Card Bills Online
Experience a smooth-flowing process the next time you pay for your credit card bill.
Read insights blog
5 Key Terms in Your Credit Card Statement You Must Know
By understanding these terms, you can effectively manage your credit card usage, avoid fees...
Read insights blog
How to Access Your Funds When Traveling Abroad
It pays to be familiar with foreign exchange rates when you are on an overseas trip.
Read more
