A secured bond is a type of debt security backed by a specific asset or collateral owned by the issuer. This collateral can be tangible assets like real estate, manufacturing plants, industrial equipment, or financial assets, as well as intangible assets like revenue streams or intellectual property. The primary purpose of the collateral is to provide protection to investors in case the issuer defaults on the bond's interest or principal payments. If the issuer fails to repay the loan, bondholders have the first claim on the collateral, which can be sold to recover the investment. This reduces the credit risk for investors because they have a legal claim to specific assets to help recover their funds, making secured bonds generally less risky than unsecured bonds. Consequently, secured bonds often offer lower interest rates compared to unsecured bonds. Secured bonds are commonly issued by corporations and municipalities and can be backed by various assets or revenue streams specific to the project or purpose for which the bond was issued. In summary:

• Secured bonds are backed by collateral.
• Bondholders have a senior claim to the collateral if the issuer defaults.
• They tend to have lower risk and lower interest rates than unsecured bonds.
• Common collateral includes real estate, equipment, revenue streams, or financial assets.

This makes secured bonds an attractive investment for those seeking more security in their bond investments.