Secured Bond

AAA

DEFINITION of 'Secured Bond'

A type of bond that is secured by the issuer's pledge of a specific asset, which is a form of collateral on the loan. In the event of a default, the bond issuer passes title of the asset or the money that has been set aside onto the bondholders. Secured bonds can also be secured with a revenue stream that comes from the project that the bond issue was used to finance.

INVESTOPEDIA EXPLAINS 'Secured Bond'

Because of the pledge of an asset, secured bonds are seen as less risky than unsecured bonds, and they generally provide lower returns than unsecured bonds. Securing a bond with the pledge of an asset is also a way for the bond issuer to lower its interest payments. This means that secured bonds provide investors with a lower return than unsecured bonds because even in the event of default, investors will be compensated at least somewhat for their investment. Some types of secured bonds are mortgage bonds and equipment trust certificates.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Junk Bond

    A colloquial term for a high-yield or non-investment grade bond. ...
  3. Asset-Backed Security - ABS

    A financial security backed by a loan, lease or receivables against ...
  4. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  5. Equipment Trust Certificate

    A debt instrument that allows a company to take possession of ...
  6. Secured Note

    A type of loan that is backed by the borrower's assets. If a ...
Related Articles
  1. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  2. Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
  3. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  4. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  5. Bonds & Fixed Income

    How to Diversify with Muni Bond ETFs

    Thinking of diversifying with bonds? Consider these muni bond ETFs.
  6. Bonds & Fixed Income

    Should Junk Bond ETFs Be a Part of Your Portfolio?

    Should junk bonds be a part of your portfolio? Here's what you need to know.
  7. Mutual Funds & ETFs

    How To Build A Bond Ladder?

    Bond laddering is a strategy used when building a portfolio: an investor can spread out interest rate risk and create a stream of cash flows for income.
  8. Investing Basics

    Explaining Interest Rate Risk

    Interest rate risk is the risk that investments already held will lose market value if new investments with higher interest rates enter the market.
  9. Investing Basics

    What is an Asset Class?

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.
  10. Investing

    Rethinking About Retirement Investing?

    There are plenty of reasons to rethink your retirement investing, wherever you fall on the spectrum between fatalistic acceptance and cheerful confidence.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center