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Definition of 'Bondholder'

A bondholder is an individual or institution that owns a bond. When you buy a bond, you are lending money to the issuer of the bond, and in return, you receive interest payments. The amount of interest you receive depends on the coupon rate of the bond, which is the interest rate that the issuer agrees to pay.

Bondholders are important to the financial system because they provide a source of funding for businesses and governments. When a company or government issues a bond, it is essentially selling a promise to repay the money it borrows with interest. This allows the company or government to raise money without having to go through a bank or other financial institution.

Bondholders also play an important role in the secondary market, which is where bonds are traded after they have been issued. The secondary market allows bondholders to sell their bonds to other investors, which can help to keep the prices of bonds stable.

There are two main types of bondholders: institutional investors and individual investors. Institutional investors are large organizations, such as pension funds, insurance companies, and mutual funds, that invest money on behalf of their clients. Individual investors are individuals who invest their own money in bonds.

Bondholders can play an important role in the financial system by providing a source of funding for businesses and governments. They can also help to keep the prices of bonds stable in the secondary market.

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