Bearer Bond
A bearer bond is a physical debt security whose holder claims payment by possession, creating unusual custody, authenticity, tax, and compliance risks.
Bond principal, face value, book-entry, registered, and bearer-security terms that affect repayment, settlement, custody, and transfer.
Principal, face value, and ownership form define the amount a bond is based on, the amount normally due at maturity, and how ownership is recorded or transferred.
Use this section when a question depends on par amount, bond face value, book-entry securities, registered ownership, bearer bonds, or transfer mechanics. Pricing and bond yield calculations depend on these reference points.
| Concept | Plain-English meaning | Why it matters |
|---|---|---|
| Principal | Amount the borrower is obligated to repay under the bond terms | Drives redemption value, default exposure, and repayment schedules. |
| Face value | Stated amount used for coupon and price conventions | Helps explain premium, discount, and par pricing. |
| Market price | What the bond trades for now | Moves with rates, credit spreads, liquidity, and embedded options. |
| Book-entry form | Electronic ownership record instead of a paper certificate | Reduces certificate-handling risk and supports modern settlement. |
| Registered form | Owner is recorded by name | Helps determine who is entitled to payments and transfer rights. |
| Bearer form | Possession of the certificate historically controlled payment rights | Mainly a legacy U.S. market topic with unusual loss, authenticity, tax, and compliance concerns. |
A bond has a $1,000 face value and a 5% annual coupon. The annual coupon is based on face value, so the stated annual coupon amount is $50. If the bond trades at $960, the investor paid below face value, but the issuer’s principal promise is still measured against the bond terms, not the current market quote.
Check the CUSIP-level security description, denomination, minimum transfer amount, settlement record, registered owner or custodian, maturity schedule, redemption provisions, and whether the security is held through a broker, depository, TreasuryDirect, or another book-entry system.
Investor.gov’s bond overview explains principal, face value, maturity, and risk in beginner language. TreasuryDirect’s guidance on where Treasury securities are held is useful for understanding book-entry holding systems for U.S. Treasury marketable securities.
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A bearer bond is a physical debt security whose holder claims payment by possession, creating unusual custody, authenticity, tax, and compliance risks.
A bond is a debt security in which an issuer borrows from investors and promises interest, principal repayment, or both under stated terms.