What are the Classes of Bonds?

Bonds are classified both in terms of time to maturity, and the credit rating of the outfit offering the bond.

TIME CLASSIFICATION

Bonds that mature overnight, within one month or ninety days are three kinds of what is termed SHORT BONDS. Bonds that mature after five years, ten years or even thirty years into the future, are three kinds of what is termed LONG BONDS.

CREDIT RATING

A country will have a better credit rating than a well performed business in that country, which in turn will have a better credit rating than a business in a risky industry. The interest rate offered on a bond needs to be high if the credit rating of the organization offering the bond is low.

The interest rate at offer time is termed the coupon rate of the bond.

A Secured Bond is coupled with an asset so that if the organization that formed the bond can't make the payments or return the capital once the term is up, the bondholder can move in and demand that assets be sold so that they will get their money back. A bank loan for a specific project is an example a secured bond. By contrast an Unsecured Bondholder is at the mercy of the success of a business plan to ensure they get their money back. Unsecured bonds issued by publicly listed companies are sometimes somewhat unkindly termed Junk Bonds, reflecting their relative lack of surety.