When those bonds are sold in dollars rather than the currency of the issuing country, they're sometimes known as yankee bonds . When companies need to raise money to invest in growth and development, they can issue stock or sell bonds. They often prefer bonds, in part because issuing more stock tends to dilute , or lessen, the value of shares investors already own. Bonds may also provide some income-tax advantages. Unlike companies, governments aren't profit-making enterprises and can't issue stock.
Bonds are the primary way they raise money to fund capital improvements like roads or airports.
When a company or government wants to raise cash, it tests the waters by floating a bond . That is, it offers the public an opportunity to invest for a fixed period of time at a specific rate of interest. If investors think the rate justifies the risk and buy the bond, the issue floats. The life, or term , of any bond is fixed at the time of issue. Generally speaking, the longer the term, the higher the interest rate that's offered to make up for the additional risk of tying up your money for so long a time.