A bond purchase agreement is a document that defines the terms of a sale between the bond issuer and the bond officer. The bonds – paid once by the insurer – are properly executed, authorized, issued and delivered by the issuer to the insurer. After the issuer delivers the bonds to the insurer, the insurer will put the bonds on the market at the price and yield of the bond purchase agreement and investors will purchase the bonds from the insurer. The insurer takes the proceeds of this sale and makes a profit based on the difference between the price at which it purchased the issuer`s bonds and the price at which it sells the bonds to fixed-rate investors. Historically, another emissions practice was for the lending public authority to issue bonds over a period of time, usually at a fixed price, based on market conditions for quantities sold on a given day. This is called the tap or bond-tap show.  A bond purchase agreement (EPS) is a legally binding document between a bond issuer and an insurer that sets out the terms of the bond sale. The terms of a bond purchase agreement include, among other things, terms of sale such as the sale price, the loan rate, the maturity of the loan, provisions for withdrawal of bonds, provisions for declining funds and the conditions under which the agreement may be terminated. A loan is therefore a form of loan or IOU: the holder of the loan is the lender (creditor), the issuer of the loan is the borrower (debtor) and the coupon is the interest rate. Bonds provide the borrower with external resources to finance long-term investments or, in the case of government bonds, to finance current expenses. Certificates of deposit (CD) or short-term commercial securities are considered money market instruments and not bonds: the main difference is the life of the instrument.
Volatility in bonds (particularly short and medium bonds) is lower than for equities. As a result, bonds are generally considered safer investments than equities, but this perception is only partially correct.