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Glossary of Bond Terms: E-M

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This article is from the Investing Articles: Bonds series.

Glossary of Bond Terms: E-M

Equipment Trust Certificate

Bonds secured by a down payment (usually 20%) and also secured by the equipment they are being used to purchase.

Face Value

The stated principal amount of a bond.

General Obligation Bonds

Voter approved bonds that are backed by the full faith, credit and unlimited taxing power of the issuer. These have superior claim to most other bonds.

Housing Bonds

Bonds which are secured by mortgage re-payments on single family homes or multi unit rental properties.

Income Bonds (Adjustment Bonds)

Bonds which promise to pay interest only if earned and to the extent earned. Failure to pay timely interest does not lead to immediate default.

Indenture

The bonds contract. It states the time period for re-payment. The amount of interest paid. Whether the bond is convertible and if so at what price or what ratio. And the amount of money to be re-paid.

Industrial Revenue Bonds

Bonds used to finance the construction of manufacturing or commercial facilities for a private user. These bonds are arranged through an Industrial Development Authority. Their safety is related to the credit worthiness of the corporate guarantor.

Mello Roo's

Bonds used for developments that benefit a particular district (schools, prisons, etc.) and are secured by special taxes based on the assessed value of the properties within the district. Tax assessment is included on the county tax bill.

Moral Obligation Bonds

Bonds sold by the states without voter approval which are used for specific purposes. In the event of a shortfall, it is implied that the state will make up the difference

 

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