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  3. Bonds
  4. Different types of bonds

Different types of bonds

Asset-backed security Backed by another asset, such as housing loans.
Corporate bond Offered by listed or unlisted companies raising money.
Callable/redeemable bond Can be bought back by the issuer. Investors will lose their interest payments once this happens.
Convertible bond Can be converted into another type of security such as shares, or for cash.
Eurobond An international bond issued in Euros, or in a currency not native to the country where it is issued. An example is a bond issued by a group of banks in Singapore, denominated in US dollars, sold to international investors. These are usually sold to institutional investors. 
High yield bond Also known as junk bonds, they offer investors high interest payments but they are also high risk, and have a high probability of payment default.
Investment grade bond Issued by companies with a strong financial position.
Kauri bond Issued in NZ dollars by overseas issuers.
Municipal bond Issued by local government.
Perpetual bond A bond with no fixed maturity date. However, issuers usually include an option to recall perpetual bonds when it suits them.
Redeemable bonds Can be bought back early by the issuer, at a price fixed by them. This usually happens when the issuer finds they can get a cheaper loan elsewhere.
Secured bond Secured against an income stream, or an asset. Considered less risky than an unsecured bond.
Senior bond Ranked higher in an issuer’s repayment list if they face financial difficulty.
Subordinated bond Ranked low in an issuer’s repayment list if they face financial difficulty.
Unsecured bond Not backed by any collateral or asset. Unsecured bondholders are paid after secured bondholders when a company repays its debts.
Uridashi bond Issued outside of New Zealand in a high yield currency (such as the NZ dollar), and sold to Japanese investors.

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