Collateral trust bond

Collateral trust bond,

Definition of Collateral trust bond:

  1. A collateral trust bond is a bond that is secured by a financial asset—such as stock or other bonds—that is deposited and held by a trustee for the holders of the bond. The bond is perceived as a safer investment than an unsecured bond since the assets could be sold to pay the bondholder, if necessary.

  2. A collateral trust bond is also called a collateral trust certificate or collateral trust note.

  3. Short term debt security, issued usually by a holding company against securities of its subsidiary firms or by an investment trust against its own bonds or other obligations. Also called collateral trust certificate or collateral trust note.

How to use Collateral trust bond in a sentence?

  1. The collateral has to have a market value at the time the bond is issued that is at least equal to the value of the bonds.
  2. The value of the collateral is periodically reassessed to make sure it still matches the value initially pledged.
  3. A collateral trust bond is a type of secured bond, in which a corporation deposits stocks, bonds, or other securities with a trustee so as to back its bonds.
  4. This kind of bond is considered safer than an unsecured bond; however, the tradeoff with greater safety is a lower yield and therefore lower payout.
  5. If over time, the value of the collateral falls below the agreed-upon minimum, the issuer has to put up additional securities or cash as collateral.

Meaning of Collateral trust bond & Collateral trust bond Definition