Bond Types
Asset-Backed Securities
Acting as a tradeable financial asset, in which its collateralized value originates from a group of underlying assets. Assets with smaller values that are also hard to liquidate are grouped together. This process (securitization) turns the once illiquid assets into a financial instrument.
In the United States, Asset-Backed Securities (ABSs) are regulated by the Securities Act (1933) and Securities Exchange Act (1934). ABSs are then issued onto the primary markets for investors. They're also traded secondary through over-the-counter markets.
Convertible Bonds
A bond encompassing fixed-income interest payments, also known as debt security. Primarily issued by companies with lower credit ratings, with potential for high growth. The conversion process of a bond to stock occurs at a particular point during the lifespan of a bond. Investors may find convertible bonds favorable (in comparison to traditional stocks) due to its bond floor asset protection.
Covered Bonds
A collection of debt securities (loans), usually issued by banking or mortgage institutions. Most convertible bonds are collateralized by grouped residential mortgages. Investors favor these due to the bonds being sheltered by cashflows of underlying instruments. Convertible bonds are also held on the issuer's balance sheet, even in the case of financial institution insolvency. Thus, investors are still obliged to receive scheduled interest payments. The principal would also be paid at bond maturity, both from the underlying assets.
High-Yield Bonds
Bonds with a rating below-investment-grade standards. Yet, offering greater yields to investors than traditional, higher-quality bonds. Typically issued by companies with higher debt ratios, as well as frontier and emerging economies. High-yield bonds can also be restructured into collateralized debt obligations (CDOs). Most of the time, CDOs will retain a higher credit rating than high-yielding bonds, thus meeting the credit requirements. In which, individual and institutional investors choose to engage with said CDOs.
Serial Bonds
A financial instrument of indebtedness (bond). In which, the bond itself matures in installments over a given time period.
Treasury Bonds
Government-issued debt securities, also referred to as government bonds. All treasury bonds retain a period of maturity, depending on the government's issuing country. An example would be the United States, as the Department of Treasury issues debt securities with maturities greater than 20 years. Investors regard these as the lowest yielding, yet safest bonds with minimal risks. Treasury bonds are backed by the credit, continuity, and full faith of the relevant government.
Retail Bonds
Debt securities, which are normally issued by companies or corporations for the purposes of raising additional capital. Retail bonds are typically issued at a fixed rate to investors. They are similar to mini bonds, except offer more flexibility by being bought and sold during normal market trading hours -- rather than withholding until maturity expiration.
Zero Coupon Bonds
Also called an accrual bond. Debt securities that pay its full-face value at maturity, rather than cyclical interest payments. Once issued, zero-coupon bonds trade at deep discounts. They can also act as a short-term (one year or less) or long-term (10 to 15 years) investment.