Bonds & Debentures
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Bonds refer to high-security debt instruments that enable an entity to raise funds and fulfill capital requirements. It is a category of debt that borrowers avail from individual investors for a specified tenure.
Organizations, including companies, governments, municipalities, and other entities, issue bonds for investors in primary markets. The corpus thus collected is used to fund business operations and infrastructural development by companies and governments alike.
Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.
