SENIOR BOND Meaning and
Definition
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A senior bond is a type of debt instrument issued by a corporation or government entity that holds a higher claim on a company's or government's assets and cash flows than other debt obligations or securities. It is considered to have a seniority ranking over other bonds or loans, which means it will be paid off first in case of bankruptcy or default. It offers greater security to bondholders, making it less risky compared to subordinate or junior bonds.
Senior bonds typically have a lower interest rate or coupon rate due to their priority status. They come with a specified maturity date, upon which the principal amount is repaid to the bondholder. Interest payments are usually made periodically throughout the bond's life, enabling bondholders to receive fixed income over the investment period.
The seniority of these bonds can help determine the repayment priority in the event of bankruptcy or liquidation. When a company or government faces financial distress, bondholders with senior bonds have a higher chance of recouping their investment compared to holders of subordinate bonds.
Investors who seek stable income streams and prioritize lower risks often favor senior bonds. Large institutional investors, such as insurance companies and pension funds, are common buyers of senior bonds, as they typically have a lower risk tolerance compared to individual investors.
It is crucial for potential investors to thoroughly analyze the creditworthiness of the issuer before investing in senior bonds, as the financial strength and stability of the issuing entity directly impact the repayment of principal and interest.
Common Misspellings for SENIOR BOND
- aenior bond
- zenior bond
- xenior bond
- denior bond
- eenior bond
- wenior bond
- swnior bond
- ssnior bond
- sdnior bond
- srnior bond
- s4nior bond
- s3nior bond
- sebior bond
- semior bond
- sejior bond
- sehior bond
- senuor bond
- senjor bond
- senkor bond
- senoor bond
Etymology of SENIOR BOND
The word "senior bond" can be understood by examining the etymology of its individual words.
1. Senior: The term "senior" derives from the Latin word "senior", meaning "older" or "more advanced in age". It entered English via Middle English from Old French "sienoir", ultimately originating from Latin "senior". In finance, "senior" refers to a higher-ranking or priority position in terms of payment or security, indicating a bond with a higher claim on assets or income compared to other bonds.
2. Bond: The word "bond" comes from the Old English word "bonda", which means "a householder" or "freeholder". It is also related to Old Norse "bonde" and Middle High German "bůnt". In the financial context, a bond refers to a debt instrument issued by a corporation, municipality, or government entity to raise capital.
