Bond Characteristics

A bond is a "security" which gives the holder a financial claim on the issuer. This claim protects the holder in circumstances in which the issuer is unable to pay the amount due. It is made formal by the "trust indenture", a legal document which specifies all of the bond's features and the legal rights and obligations of all the parties to the agreement.

For the most part, the trust indenture is a musty document that never sees the light of day after the issue. However, if a contentious issue arises, lawyers spend hours trying to convince judges of what these moldy clauses really mean. This happens in defaults and reorganization proceedings, when the interpretation of these fine legal points can mean literally millions of dollars to the creditors and company. Different aspects of the "security" are listed below:

Public and Private Issues

Types of Fixed Income Securities

Bond Covenants

Bond Payment Terms

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