Debenture

AAA

DEFINITION of 'Debenture'

A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

INVESTOPEDIA EXPLAINS 'Debenture'

Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

RELATED TERMS
  1. Effective Net Worth

    The shareholders' equity of a corporation, plus subordinated ...
  2. Fixed Debenture

    A note that carries a fixed (as opposed to floating) charge against ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Convertible Debenture

    A type of loan issued by a company that can be converted into ...
  5. Hypothecation

    The established practice of a borrower pledging an asset as collateral ...
  6. Unsecured Creditor

    An individual or institution that lends money without obtaining ...
Related Articles
  1. Will Corporate Debt Drag Your Stock ...
    Investing Basics

    Will Corporate Debt Drag Your Stock ...

  2. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  3. A Look At National Debt And Government ...
    Bonds & Fixed Income

    A Look At National Debt And Government ...

  4. The Basics Of The T-Bill
    Bonds & Fixed Income

    The Basics Of The T-Bill

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center