What is a bond?
A bond is a loan. You lend money to a government, a mortgage institution or a company, and in return you get a fixed interest (called the coupon) every year and the whole amount back on an agreed date. You do not own any part of the issuer — you are a lender, not a co-owner. That is why bonds usually swing less than stocks, but also give less over the long run.
A bond is a loan: fixed interest every year, and the whole amount back at the end.
A worked example
You buy a bond at price 100 for 10,000. It runs for 5 years and has a coupon of 3%.
- Every year you receive 300 in interest.
- After 5 years you get your 10,000 back.
- 1,500 in interest over five years in total — whatever the stock market did meanwhile.
If you sell before the end, you get whatever price the market offers that day. It can be above or below 100.
Why the price moves when interest rates move
Your bond pays 3%. If interest rates in general rise to 5%, nobody will pay price 100 for your 3% bond — they can get 5% on a new one. So the price of yours falls until it effectively yields 5%. If rates fall instead, the price of yours rises. Rates up = price down, and the other way round. The longer the bond runs, the bigger the swing.
If you keep the bond to maturity, the price swings do not matter: you still get 300 a year and 10,000 at the end.
The three kinds you meet
- Government bonds: Loans to the state. Very safe, low interest.
- Mortgage bonds (covered bonds): Loans to homeowners through a mortgage institution. Denmark's market is one of the largest in the world, and they are considered very safe.
- Corporate bonds: Loans to a company. Higher interest, because the company can go bankrupt. "High yield" means high interest — and high risk.
Most beginners do not buy individual bonds but a bond fund or ETF that owns hundreds.
Tax (Denmark, 2026)
Interest and price gains on bonds are taxed as capital income in Denmark — not as share income. Bonds and bond funds are also not allowed in an aktiesparekonto. That is one reason many Danes keep stocks and bonds in separate accounts. Other countries have their own rules.
The typical beginner's mistake
Believing a bond cannot fall. It can — every time interest rates rise. It just cannot fall to zero unless the issuer goes bankrupt, and at maturity you get the agreed amount.
How you see it in Kiggo
Kiggo is built for stocks and ETFs. If you look up a bond ETF, Kiggo shows that it is a bond fund and skips the key figures that only make sense for stocks. In the app's glossary, bond comes with a small timeline showing the coupons and the repayment.
Related terms
Frequently asked questions
Are bonds safe?
Safer than stocks, but not risk-free. The price falls when interest rates rise, and a company can go bankrupt. Government bonds from stable countries and Danish mortgage bonds are considered very safe.
What is a coupon?
The fixed interest the bond pays — say 3% a year of the amount printed on the bond. The name comes from the days when you cut a coupon off the paper to collect the interest.
What does price 100 mean?
That the bond trades at exactly the amount you get back at maturity. Below 100 you buy at a discount and get a higher effective yield; above 100 you pay a premium and get a lower one.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
