Straight Bond

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DEFINITION of 'Straight Bond'

A bond that pays interest at regular intervals, and at maturity pays back the principal that was originally invested. Straight bonds are debt instruments because they are essentially loaning money (creating debt) to an entity. The entity (government, municipality, or organization) promises to pay the interest on the "debt" and at maturity pay back the original loan.

BREAKING DOWN 'Straight Bond'

A straight bond is the most basic of debt investments. It is also knows as a plain vanilla bond because there are no additional features that other bonds might have. For example, some bonds can be converted into shares of common stock. As with all bonds there is default risk, which is the risk that the company could go bankrupt and no longer honor its debt obligations.

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