Also known as fixed-income securities. A debt instrument issued in the capital market by a person, company or government which allows them to obtain financial resources. An interest-paying bond, certificate of deposit, commercial paper, and debentures are examples of debt securities.

A security represents a type of “loan” given by an investor to an issuer. In return for the loan, the issuer promises to pay interest and to repay the debt on a specified date. security issuers may include corporations, municipalities, the federal government or a federal agency.

These debt securities are interest-bearing financial instruments. The interests can be paid in different time periods or they can even not be paid until the bond’s (a type of security) maturity (original issue discount bond). Short-term bonds mature in a few months; long-term bonds may not reach maturity for 20 of 30 years.

The further a bond is from its maturity, the greater its interest rate sensitivity. Therefore, short-term bonds are less affected by interest rate changes, making them less risky. There are also bonds that have a call feature; this means that the issuer can repurchase the bond on a specific date, before the bond’s maturity.

In general, debt securities are less risky than stocks, although the riskiness depends on the creditworthiness of the issuer. Interest rate risk refers to changes in a bond’s value because of changes in interest rates. Other risks include call risk, company risk, reinvestment rate risk, country risk and market risk. Debt securities provide investors with fixed incomes, which is the reason why debt securities are also called fixed-income securities.