Unsecured bonds are commonly referred to as what?

Unsecured bonds are commonly referred to as debentures because they are not backed by any specific assets or collateral. Instead, their value is based on the issuer's creditworthiness and reputation. Debentures represent a promise to pay the bondholder a specified rate of interest and to return the principal amount upon maturity. This classification distinguishes them from secured bonds, which are backed by the issuer's assets, providing security to bondholders in case of default.

Furthermore, government bonds typically refer to securities issued by government entities, which can be secured or unsecured depending on the context. Redeemable bonds involve a specific feature allowing the issuer to buy back the bonds at a predetermined price before maturity. Understanding the characteristics of debentures is essential for investors, as they carry different risk profiles compared to secured bonds, influencing investment strategies and portfolio diversification.