Registered Bond

Registered Bond Bonds Fixed Income Investments Securities Bond Registration Transfer of Ownership
A registered bond is a type of bond that is recorded in the name of the holder on the books of the issuer or the issuer's registrar. It can be transferred to another owner only when endorsed by the registered owner. This is in contrast with a coupon bond.
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Registered Bond

A registered bond is a debt security in which the ownership is recorded in the records of the issuer or the issuer’s appointed registrar. This means that the owner of the bond is registered with the company that issued the bond, and the principal and interest payments are made directly to the registered owner. The transfer of ownership can only occur when the current registered owner endorses the bond to the new owner.

Key Features

  1. Ownership Record: The bondholder’s name, contact information, and the bond’s serial number are recorded in the issuer’s books.
  2. Direct Payments: Interest and principal payments are made directly to the registered owner.
  3. Transfer Requirements: Transfer of ownership requires endorsement by the registered owner.
  4. Enhanced Security: Reduced risk of theft or loss as the ownership of the bond is documented.

Examples

  1. U.S. Treasury Bonds: Many U.S. Treasury bonds are issued as registered bonds.
  2. Corporate Bonds: Various companies issue registered bonds to manage interest payments directly to investors.

FAQs

  1. What is the primary advantage of a registered bond compared to a coupon bond?

    • Answer: Registered bonds offer greater security as ownership is tracked in the issuer’s books, reducing the risk of theft or loss.

  2. Can a registered bond be transferred easily?

    • Answer: Yes, but it requires the endorsement of the current owner, ensuring a recorded and legitimate transfer.

  3. How are interest payments made on a registered bond?

    • Answer: Interest payments are made directly to the bondholder whose name is registered with the issuer.

  4. What is a common example of a registered bond?

    • Answer: U.S. Treasury bonds are often issued as registered bonds.

  5. How does the issuer benefit from issuing registered bonds?

    • Answer: Issuers can efficiently manage and confirm rightful ownership, ensuring interest and principal payments are correctly allocated.
  1. Registrar: An entity maintained by the issuer who keeps records of the bondholders and ensures accurate transfer of ownership.
  2. Coupon Bond: A bond that is not registered to any specific holder. Interest payments are made to whoever holds the bond, usually collected by submitting a coupon.

Online References

Suggested Books for Further Studies

  1. The Bond Book by Annette Thau
  2. Investing in Bonds for Dummies by Russell Wild
  3. Bond Markets, Analysis and Strategies by Frank J. Fabozzi
  4. Fixed Income Securities: Tools for Today’s Markets by Bruce Tuckman

Fundamentals of Registered Bond: Finance Basics Quiz

### What is a primary feature of a registered bond? - [x] Ownership is recorded in the issuer's books. - [ ] Interest is paid to anyone who presents the coupon. - [ ] The bond cannot be transferred to another owner. - [ ] Interest payments are not made directly to the owner. > **Explanation:** The primary feature of a registered bond is that ownership is recorded in the issuer's books, ensuring direct payment to the registered owner. ### How can a registered bond be transferred to another owner? - [ ] Simply by handing over the bond certificate. - [ ] Through a broker without any endorsement. - [x] Only when endorsed by the registered owner. - [ ] It cannot be transferred at all. > **Explanation:** A registered bond can be transferred to another owner only when it is endorsed by the registered owner, ensuring an authorized transfer. ### What advantage does a registered bond have over a coupon bond? - [ ] More flexibility in trading. - [ ] Higher interest rates. - [x] Reduced risk of theft or loss. - [ ] No need for endorsement upon transfer. > **Explanation:** A registered bond offers enhanced security due to the reduced risk of theft or loss since ownership is recorded officially. ### Who ensures the accurate transfer of ownership in registered bonds? - [ ] The government. - [x] The registrar. - [ ] A financial advisor. - [ ] The bondholder. > **Explanation:** The registrar is responsible for keeping records of bondholders and ensuring the accurate transfer of ownership. ### Where are the owner's details kept for a registered bond? - [x] In the issuer’s official records. - [ ] On a detachable coupon. - [ ] With the bond purchaser. - [ ] On the bond market exchange. > **Explanation:** The owner's details for a registered bond are kept in the issuer's official records. ### How are interest payments made for registered bonds? - [ ] By issuing coupons that the holder can cash. - [x] Directly to the registered owner. - [ ] Through a public drawing. - [ ] Via an intermediary financial institution. > **Explanation:** Interest payments for registered bonds are made directly to the registered owner. ### What type of bond does not have ownership recorded with the issuer? - [ ] Registered bond - [x] Coupon bond - [ ] Treasury bond - [ ] Corporate bond > **Explanation:** A coupon bond does not have ownership recorded with the issuer; interest is paid to whoever holds the bond. ### Why might an issuer prefer to issue registered bonds? - [x] To efficiently manage payment distributions to known owners. - [ ] To facilitate easier trade in secondary markets. - [ ] To offer higher interest benefits to investors. - [ ] To avoid the need for a registrar. > **Explanation:** Issuers might prefer registered bonds to efficiently manage interest and principal payment distributions to registered owners. ### Which organizational entity typically manages the registration of bondholders? - [ ] The Securities and Exchange Commission (SEC) - [ ] The corporate leadership team - [x] The registrar - [ ] An independent consultant > **Explanation:** The registrar is the entity responsible for managing the registration and transfers of bondholders. ### What is an essential requirement for the transfer of ownership of a registered bond? - [ ] Payment of a transfer fee. - [ ] Approval from the original issuer. - [x] Endorsement by the current registered owner. - [ ] A notary public's signature. > **Explanation:** The essential requirement for transferring ownership of a registered bond is the endorsement by the current registered owner.

Thank you for learning about registered bonds. To deepen your understanding, consider exploring the suggested books and online references. Happy studying!

Wednesday, August 7, 2024
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