secured bond

Definition

Bond backed by collateral, such as a mortgage or lien, the title to which would be transferred to the bondholders in the event of default. The most common form of secured bonds are mortgage bonds. These bonds are backed by real estate or physical equipment that can be liquidated. These are thought to be high-grade, safe investments. Other bonds are secured by the revenues created by projects. If an issuer in default has both secured and unsecured bonds outstanding, secured bondholders are paid off first, then unsecured bondholders. Naturally, because unsecured bonds carry greater risk than secured bonds, they usually pay higher yields.

Use secured bond in a sentence

It was a secured bond because it was backed by a mortgage and I tried to explain that to my friend who didn't understand.

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The company continued to offer secured bonds of their collateral that they were originated on the market to expand their business model.

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The secured bond backed by the mortgage on his McMansion was considered a very, very safe bet and he was glad that he decided to commit to such a venture.

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