Serial bonds

Definition

Serial bonds are a type of bond issuance in which a portion of the total bond issue matures at regular intervals until the entire issue is repaid. This structure helps to spread out the repayment burden over time, making it easier for the issuer to manage cash flows.

5 Must Know Facts For Your Next Test

1. Serial bonds have staggered maturity dates, unlike term bonds which mature on a single date.
2. They help issuers manage liquidity by spreading out repayment obligations over several periods.
3. Interest rates for serial bonds can vary depending on their maturity dates.
4. Investors might prefer serial bonds for their reduced risk due to diversified maturity timelines.
5. Serial bonds are commonly used by municipalities and public utilities for large projects.

Review Questions

• What is the primary difference between serial bonds and term bonds?
• How do serial bonds help issuers manage liquidity?
• Why might an investor prefer serial bonds over other types of bonds?

Related terms

Term Bonds: Bonds that mature on a single specified date.

Callable Bonds: Bonds that can be redeemed by the issuer before their maturity date.

Municipal Bonds: Bonds issued by local government entities, often used to finance public projects.