Taxable Bonds

Secured Bonds

There are two types of corporate bonds: secured and unsecured. Secured bonds are more conservative than unsecured bonds because assets are pledged as a collateral to pay interest and principal on the bonds. In the event of a bankruptcy, secured debt is paid first thereby requiring an issuer to pay lower yields on its debt as opposed to unsecure debt. Also, there is a hierarchy of risk to debt payments. First, secure claims on assets are paid. Second, unpaid wages and taxes are paid. Last, subordinated debt and equity holders are paid.