DEFINITION of 'Guaranteed Bond'

A debt security that offers a secondary guarantee that interest and principal payment will be made by a third party, should the issuer default due to reasons such as insolvency or bankruptcy. A guaranteed bond can be municipal or corporate, backed by a bond insurer, a fund or group entity, or a government authority.

BREAKING DOWN 'Guaranteed Bond'

Bonds have an inherent risk of default that could mean a bondholder never gets the principal back upon maturity and loses out on periodic interest payments. A guaranteed bond removes this risk by creating a back-up payer in the event that the issuer is unable to fulfill its obligation. Because of this lowered risk, guaranteed bonds generally have a lower interest rate than non-guaranteed bonds.

  1. Bond Insurance

  2. Financial Guarantee

    An non-cancellable indemnity bond that is backed by an insurer ...
  3. Bond

  4. Municipal Bond

  5. Insured Bond

    A bond with interest and principle payments insured by a third ...
  6. Bond Resolution

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  1. Who or what is backing municipal bonds?

  2. Which factors most influence fixed income securities?

  3. In the context of a bond, what does the principal refer to?

  4. What is the difference between a bank guarantee and a bond?

    Understand what a bank guarantee is and what a bond is, and which one is a debt instrument. Learn the differences between ... Read Answer >>

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