What is a 'Bond Trustee'

A bond trustee is a financial institution with trust powers, such as a commercial bank or trust company, that is given fiduciary powers by a bond issuer to enforce the terms of a bond indenture. An indenture is a contract between a bond issuer and a bond holder. A trustee sees that bond interest payments are made as scheduled, and protects the interests of the bondholders if the issuer defaults.



BREAKING DOWN 'Bond Trustee'

The bond trustee is responsible for the registration, transfer and payment of bonds. The bond trustee is required to maintain separate accounts, monitor bond document requirements and provide monthly statements. The bond trustee approves amendments to some documents and acts on behalf of the bondholders if the borrower or issuer violates certain bond documents. A bond trustee must have adequate staff and systems to efficiently perform its duties and comply with the various federal, state and bond issue requirements.

RELATED TERMS
  1. Trust Indenture

    An agreement in the bond contract made between a bond issuer ...
  2. Trust Indenture Act of 1939

    A law passed in 1939 that prohibits bond issues valued at over ...
  3. Bond Resolution

    1. A document used with government bonds, especially general ...
  4. Serial Bond

    A bond issue in which a portion of the outstanding bonds matures ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Collateral Trust Bond

    A bond that is secured by a financial asset - such as stock or ...
Related Articles
  1. Investing

    What is an Indenture?

    An indenture is a legal and binding contract between a bond issuer and the bondholders.
  2. 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.
  3. Investing

    An Introduction to Individual Bonds

    Individual bonds are better than bond funds and can be a key component to one’s investment strategy.
  4. Investing

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  5. Investing

    Corporate Bond Basics: Learn to Invest

    Understand the basics of corporate bonds to increase your chances of positive returns.
RELATED FAQS
  1. What is an indenture for a fixed income security?

    Learn about the indenture for a fixed-income security and its features, as well as the role of the trustee in administering ... Read Answer >>
  2. A corporate bond I own has just been called by the issuer. How can a company legally ...

    Bond issues can contain what is referred to as a call provision, which is a right afforded to the issuing company enabling ... Read Answer >>
  3. What are the risks of investing in a bond?

    The most well-known risk in the bond market is interest rate risk - the risk that bond prices will fall as interest rates ... Read Answer >>
  4. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ... Read Answer >>
  5. What does it mean when a bond has a put option?

    A put option on a bond is a provision that allows the holder of the bond the right to force the issuer to pay back the principal ... Read Answer >>
  6. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center