A written, or otherwise recorded promise to repay. Debt instruments enable the issuer to raise capital, by establishing terms attractive to suppliers of capital to invest. |
Debt instruments typically state a repayment schedule, establish a interest rate on outstanding debt, and explicitly state the issuer's obligation to repay.
Standardize debt instruments make issuing, purchasing and transfering these obligations easy. Such added liquidity makes the purchase and issuance of debt more attractive, since purchases gain confidence that they may trade their debt easily in the market, and issuers may be confident that can find a purchasers of their new debt.