Bonds are one of the most commonly used debt instruments for raising missing financial resources. They are very common in most capital markets, including in the capital market of the Republic of Srpska. By their very nature, they represent a convenient way to raise larger amounts of capital, and spread the debt over a larger period of time. Underdeveloped capital markets are typically characterized by a limited range of bond types. As such, bonds occupy a significant place on the domestic capital market due to the volume of turnover. The paper discusses some of the basic types of bonds, their adequacy for raising capital for financing capital projects of central and local governments, the return they bring to investors, and the potential risks that may arise, as well as the current level of development of the domestic capital market. By using methods of analysis and synthesis of issued bonds on the capital market of the Republic of Srpska, an attempt is made to draw conclusion about the suitability of issuing bonds for financing capital projects. Despite the underdeveloped nature of domestic capital market, the issuance of bonds represents an adequate and sustainable model for raising long-term capital to finance capital projects.

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