Bond vs. Fixed Deposit: What's the Difference?
Both lend your money in return for interest, but to different borrowers and with different flexibility. A fixed deposit lends to a bank for a set term at a guaranteed rate. A bond lends to a government or company, pays regular interest, and can often be traded before it matures. This is general information, not investment advice.
See the difference, explained visually.
Watch a 2-minute animated lesson comparing bond and fixed deposit.
At a glance
| Bond | Fixed Deposit | |
|---|---|---|
| You lend to | A government or company | A bank |
| Return | Fixed interest (coupon) | Fixed interest rate |
| Tradable? | Yes — can be sold before maturity | No — locked for the term |
| Risk | Depends on the issuer's credit | Very low (often insured) |
| Price changes | Prices move with interest rates | Value doesn't fluctuate |
Which should you use?
Bond
A bond can suit those wanting regular income and the option to sell early, who accept that prices move with interest rates and that company bonds carry the issuer's credit risk.
Fixed Deposit
A fixed deposit suits those who want maximum safety and a guaranteed return, and don't need the money until the term ends.
Frequently asked questions
- Which is safer, a bond or an FD?
- A fixed deposit is generally safer — returns are guaranteed and deposits are often insured. A bond's safety depends on the issuer; government bonds are very safe, company bonds less so. General information, not advice.
- Can I sell a bond early?
- Usually yes — bonds trade in markets, so you can sell before maturity, though the price may be higher or lower than you paid. An FD is locked, with a penalty for breaking it early.
- Why do bond prices change?
- Mainly because of interest rates. When rates rise, existing bonds paying lower rates become less attractive, so their prices fall — and vice versa.