Some bonds are known as bearer bonds or coupon bonds. These bonds are not registered in the name of individual holders; instead, they are negotiable by whoever holds them. To receive interest payments, the current holders simply clip off a coupon and redeem it at an authorized bank. Because coupon bonds do not offer much safety to the holder, most currently issued bonds are registered. This means that the bonds are registered in the name of the holder and that all interest payments are made by the issuing company directly to the current bondholder.
Coupon Bonds vs Registered Bonds FAQs
Registered bonds are debt securities issued by governments or companies that are kept in the depository's system. All interest payments are made to the registered owner of the specific security, which is identified by means of a registration number, thus eliminating any need for coupons. This allows bondholders to keep their records straight without having to cut coupons and some bond holders make it a habit of selling their right to receive coupon payments.
Registered bonds are issued by governments or companies, just like bearer bonds. The issuer can be either an individual company or a country seeking capital from investors who want to lend them money.
Registered bonds can be bought by anyone, whether they are an investor or not. Owning a bond means that you have loaned money to its issuer and in return, you're guaranteed to receive all interest payments and the principal at maturity. This also makes it possible for companies and governments to issue unsecured bonds with no assets to back them up.
Repayment of the principal and interest begins on the registered bonds' maturity date, which is printed on the bond's face along with all other information about it. It is important for investors to pay attention to when a bond matures so they know when their money is due.
Registered bonds offer a constant return, which means the interest payment remains the same throughout the life of the bond, but it also has no secondary market so you cannot sell your bond before maturity date.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.
