• A guaranteed bond is a debt security that promises that, in the event of default by the issuer, payment of interest and principal will be made by a third party.
  • Corporate or municipal bond issuers turn to guarantors, which can be financial institutions, funds, governments or subsidiaries, when their own creditworthiness is weak.
  • On the other hand, guaranteed bonds are very safe for investors and allow organizations to receive funding, often on better terms than they might otherwise.
  • On the other hand, guaranteed bonds tend to pay less interest than their non-guaranteed counterparts; they also require more time and money for the issuer, which must pay a commission to the guarantor and be subject to frequent financial audits.