What is a 'Registered Bond'

A registered bond is a bond which has its owner registered with the bond's issuer. The owner's name and contact information is recorded and kept on file with the company, allowing it to pay the bond's coupon payment to the appropriate person.

BREAKING DOWN 'Registered Bond'

When a bond is registered, the issuer records the name of the owner and information about the bond issue. A bond that is registered in physical form has the owner’s name printed on the bond certificate. Transferring the ownership of a registered bond certificate bonds requires that the registered owner endorse the back of the certificate or sign the certificate over to someone else before the transfer can be completed.

A bond can also be registered electronically, which is how most bonds are now tracked, using computers to record owners’ information. An electronic bond simply needs to have any change of information phoned, mailed, or faxed to the company in order to facilitate a transfer of ownership.

Registered bonds include debt obligations that have the owner’s name and contact information registered on file at the issuing company. Only the registered owner as of the interest payment date can receive the agreed upon earnings payment. Anyone who possesses or presents a bond certificate for coupon payments but is not the registered owner on file will not be issued coupon payments. If a registered bond is lost, stolen, or destroyed, it can be easily replaced given that the owner’s definite information is on file with the issuer.

Registered bonds are the opposite of bearer bonds, which contain no information on the owner. Bearer bonds will make a coupon payment or the principal repayment to whoever holds the physical certificate. A bearer bondholder must cut the coupons attached to the bond certificate and present them for interest payments, hence, the name “coupons” associated with bonds. Bearer bonds that are lost cannot be replaced as no records exist on the identity of the security owner.

The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 changed the tax treatment of bearer bonds by removing the option of tax-exempt bonds to be issued in bearer form to the public unless the bond matured in one year or less. Municipal bonds, which have a tax-exempt status that serves as an attractive feature to investors, became less common in bearer form after the tax law went into effect. Many municipalities now issue bonds in registered form to raise money for capital projects relating to a state city, county, or town. These registered municipal bonds are exempt from taxes, but typically offer lower rates than corporate bonds.

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