Secured bond

The issuer of a bond or other debt security may guarantee, or secure, the bond by pledging, or assigning, collateral to investors. If the issuer defaults, the investors may take possession of the collateral.

A mortgage-backed bond is an example of a secured issue, since the underlying mortgages can be foreclosed and the properties sold to recover some or all of the amount of the bond.

Holders of secured bonds are at the top of the pecking order if an issuer misses an interest payment or defaults on repayment of principal.