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A
type of debt instrument that is not secured by physical asset or
collateral. Debentures are backed only by the general creditworthiness
and reputation of the issuer. Both corporations and governments
frequently issue this type of bond in order to secure capital. Like other
types of bonds, debentures are documented in an indenture.
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 |
