Bonds can be issued in two different ways:
- Registered Bonds: The owner’s name is registered with the corporation and interest rates are mailed directly to the owner (bondholder). These are generally issued by corporations.
- Bearer Bonds: The bond is presumed to belong to whoever is in possession of the bond. These are generally issued by governments, municipalities and agencies.
Most bonds are unsecured and are based on the reputation and your faith that the issuer will repay its debt.
- Secured Bonds: A secured bond is backed by collateral (like equipment or property) which may be sold if the bond issuer does not fulfill its obligation.
- Unsecured or Debenture Bonds: This is backed by the "full faith and credit" of the issuer, but not collateral. In the case of the U.S. government, that means a great deal. In the case of some companies, not as much.