Bearer Instrument

DEFINITION of 'Bearer Instrument'

A bearer instrument, or bearer bond, is a type of fixed-income security where no ownership information is recorded and the security is issued in physical form to the purchaser. The holder is presumed to be the owner, and whoever is in possession of the physical bond is entitled to the coupon payments.

To receive coupon payments, the bondholder must clip the coupons attached to the bond and submit them for payment. This contrasts with book-entry, where ownership information is noted in a computer database and there are no physical bond certificates.

BREAKING DOWN 'Bearer Instrument'

It has not been legal to issue bearer bonds in the U.S. municipal or corporate markets since 1982. The only bearer bonds available in the secondary market are long-dated maturities issued before this date, which are becoming increasingly scarce.

RELATED TERMS
  1. Bearer Form

    A security not registered in the issuing corporation's books ...
  2. Bearer Bond

    A fixed-income instrument that is owned by whoever is holding ...
  3. Bearer Share

    An equity security that is wholly owned by whoever holds the ...
  4. Pay To Bearer

    Any check or draft that can be transferred to the holder by delivery ...
  5. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  6. Registered Bond

    A bond whose owner is registered with the bond's issuer. The ...
Related Articles
  1. Investing

    What is a "Coupon"?

    In the financial world, “coupon” represents the interest rate on a bond.
  2. Markets

    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.
  3. Investing

    Explaining the Coupon Rate

    Coupon rate is the stated interest rate on a fixed income security.
  4. Markets

    How Does A Bond’s Coupon Interest Rate Affect Its Price?

    All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays.
  5. Markets

    If I Buy A $1,000 10-Year Bond With A 10% Coupon, Will I Receive $100 Each Year?

    Investors can count on a fixed-income security paying them a certain amount of cash as long as the security is held until maturity and the issuer doesn’t default.
  6. Markets

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  7. Managing Wealth

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  8. Managing Wealth

    Risks To Consider Before Investing In Bonds

    Make sure you understand the risks associated with bonds before making an investment decision.
  9. Managing Wealth

    Bond Portfolios Made Easy

    Bonds have typically been viewed as stocks' less-glamorous sidekick, but they deserve a little more respect from investors.
  10. Markets

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
RELATED FAQS
  1. How does the money from the interest on my bond get to me?

    When you buy a regular coupon bond, you are entitled to a coupon, which is typically paid at regular intervals, and the face ... Read Answer >>
  2. How does a bond's coupon rate affect its price?

    Find out how a bond's coupon rate influences its price, including the role of government-dictated interest rates and the ... Read Answer >>
  3. Why do bond coupon rates vary so greatly?

    Learn about the two major reasons that cause bond coupon rates to vary so dramatically and what role coupons play in the ... Read Answer >>
  4. If I buy a $1,000 bond with a coupon of 10% and a maturity in 10 years, will I receive ...

    Simply put: yes, you will. The beauty of a fixed-income security is that the investor can expect to receive a certain amount ... Read Answer >>
  5. How do debit spreads impact the trading of options?

    Find out what it means when a bond has a coupon rate of zero and how a bond's coupon rate and par value affect its selling ... Read Answer >>
  6. What is accrued interest, and why do I have to pay it when I buy a bond?

    A bond represents a debt obligation whereby the owner (the lender) receives compensation in the form of interest payments. ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center