Bearer Bonds

Bonds which are issued in coupon or bearer form do not record the owner’s information with the issuer and the bond certificate does not have the legal owner’s name printed on it. As a result, anyone who possesses the bond is entitled to receive the interest payments by clipping the coupons attached to the bond and depositing them in a bank or trust company for payment. Additionally, the bearer is entitled to receive the principal payment at the bond’s maturity. Bearer bonds are no longer issued within the United States; however, they are still issued outside the US.

Registered Bonds

Most bonds are now issued in registered form.  Bonds that have been issued in registered form have the owner’s name recorded on the books of the issuer and the buyer’s name will appear on the bond certificate.

Principal Only Registration

Bonds that have been registered as to principal only have the owner’s name printed on the bond certificate.  The issuer knows who owns the bond and who is entitled to receive the principal payment at maturity.  However, the bondholder will still be required to clip the coupons to receive the semi-annual interest payments.

Fully Registered

Bonds that have been issued in fully registered form have the owner’s name recorded for both the interest and principal payments.  The owner is not required to clip coupons and the issuer will send out the interest payments directly to the holder on a semi-annual basis. The issuer will also send the principal payment along with last semi-annual interest payment directly to the owner at maturity. Most bonds in the US are issued in fully registered form.

Book Entry / Journal Entry

Bonds that have been issued in book entry or journal entry form have no physical certificate issued to the holder as evidence of ownership.  The bonds are fully registered and the issuer knows who is entitled to receive the semi-annual interest payments and the principal payment at maturity.  The investor’s only evidence of ownership is the trade confirmation, which is generated by the brokerage firm, when the purchase order has been executed.

Bond Certificate

If a bond certificate is issued, it must include:

  • Name of issuer
  • Principal amount
  • Issuing date
  • Maturity date
  • Interest payment dates
  • Place where interest is payable (paying agent)
  • Type of bond
  • Interest rate
  • Call feature (if any or non callable)
  • Reference to the trust indenture

 



Bond Pricing

Related Articles
  1. Investing

    Bearer Bonds: From Popular To Prohibited

    These coupon bonds are transferable, negotiable and anonymous - so why aren't they sold in the U.S.?
  2. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
  3. Financial Advisor

    7 Questions to Consider Before Investing in Bonds

    There is a significant number of questions every investor, private or institutional, should consider before investing in bonds.
  4. Financial Advisor

    Using Excel PV Function to compute Bonds PV

    To determine the value of a bond today - for a fixed principal (par value) to be repaid in the future at any predetermined time - we can use an Excel spreadsheet.
  5. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  6. Investing

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
  7. Investing

    Risks To Consider Before Investing In Bonds

    Make sure you understand the risks associated with bonds before making an investment decision.
  8. Investing

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center