Different Bond Types
There are many different bond types. Bonds
are debt securities. Different bond types are issued by the US
Government, state and local governments, municipalities,
foreign governments, Federal agencies, and corporations.
When a corporation issues a bond, it needs to consider which of
the different bond types to issue. Corporations must decide
whether to issue short term bonds, long term bonds, straight
bonds, convertible bonds, US bonds, Eurobonds, and also
whether to issue the bond privately or publicly.
A company has to constantly consider many
different bond types to issue because different bonds types
have different characteristics that could have a large impact
of the amount of money raised. Many corporations issue, not
just one bond type but, many different bond types at any one
time. Below are common types of bonds.
| Agency bonds |
Bonds issued by agencies
such as Ginnie Maes, Freddie Macs or Fannie
Maes. Examples are mortgage backed bonds.
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Asset backed bonds
|
Bonds backed by accounts
receivable or money owed to the issuer.
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Baby bonds
|
A baby bond has a par value
of less than $1,000.
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Callable bonds
|
Bonds that can be called by
the issuer to mature earlier than the maturity
date.
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Collateralized mortgage
obligations (CMOs)
|
A CMO is a complex mortgage
backed corporate bond. It is similar to agency
mortgage backed bonds but its yield is not
guaranteed and does not have government
backing.
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Corporate bonds
|
Bonds issued by
corporations.
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Convertible bonds
|
Bonds that give you the
option of converting, or changing into stocks
instead of getting a cash repayment.
|
| Debentures |
The most common type of corporate
bonds, backed by the credit worthiness of the
issuer. |
| General obligation bonds
(GOs) |
A Go is a Municipal bond,
backed by the full faith and credit of the
issuer. |
| Junk bonds |
The lowest rated corporate
bonds. |
| Mortgage backed bonds |
Bonds backed by a pool of mortgage
loans. |
| Prerefunded bonds |
High rated corporate bonds or
municipal bonds whose repayment is guaranteed
by a second bond issuer. |
| Revenue bonds |
Municipal bonds backed by the
revenues of a project. |
| Self amortizing bonds |
Each payment of a self amortizing
bond includes both the principal and the
interest. There is no lump sum repayment at
maturity. |
| Senior bonds |
Bonds with stronger claims than
subordinated bonds. |
| Subordinated bonds |
Bonds that will be paid after
other loan obligations of the issuer have been
met. |
|
War bonds
|
Government authorized bonds issued
for bad times. |
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