Debenture
A type of debt
instrument that is
not secured by
physical asset or
collateral.
Debentures are
backed only by the
general
creditworthiness and
reputation of the
issuer. Both
corporations and
governments
frequently issue
this type of bond in
order to secure
capital. Like other
types of bonds,
debentures are
documented in an
indenture.
Debentures have no
collateral. Bond
buyers generally
purchase debentures
based on the belief
that the bond issuer
is unlikely to
default on the
repayment. An
example of a
government debenture
would be any
government-issued
Treasury bond
(T-bond) or Treasury
bill (T-bill).
T-bonds and T-bills
are generally
considered risk free
because governments,
at worst, can print
off more money or
raise taxes to pay
these type of debts
