Commodity-Backed Bond

Commodity-Backed Bond
A commodity-backed bond is a type of debt security which is linked with the price of a commodity. Under the most common arrangement, the interest rate paid on a commodity-backed bond is set to fluctuate based on the market price of the commodity to which it is linked.

Commodity-backed bonds are often issued by the producers of those commodities. This reduces default risk since the profits of producers generally fluctuate based on the price of the commodity. If the price of the commodity increases, then the producers can afford to pay the higher interest rates. If prices fall, the producers pays less interest, cushioning the blow.


Investment dictionary. . 2012.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • commodity-backed bond — A bond with interest payments tied to the price of an underlying commodity. Bloomberg Financial Dictionary …   Financial and business terms

  • Commodity-Backed Bonds — A commodity backed bond is an investment term referring to a type of bond whose value is directly related to the price of a specified commodity. Most bonds have a fixed value determined at the time of purchase. A commodity backed bond, however,… …   Investment dictionary

  • Bond insurance — (also known as financial guaranty insurance ) is a type of insurance whereby an insurance company guarantees scheduled payments of interest and principal on a bond or other security in the event of a payment default by the issuer of the bond or… …   Wikipedia

  • Bond (finance) — In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) to use and/or to repay the principal at a later date, termed maturity.… …   Wikipedia

  • Bond market — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal …   Wikipedia

  • Bond duration — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

  • Mortgage-backed security — Securities Securities Bond Stock Investment fund Derivative Structured finance Agency security …   Wikipedia

  • Corporate bond — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal …   Wikipedia

  • Commercial mortgage-backed security — Securities Securities Bond Stock Investment fund Derivative Structured finance Agency security …   Wikipedia

  • Municipal bond — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”