A bearer bond is a bond which is not registered in the name of a specific individual, and therefore can easily be transferred from one owner to another. They do not have a specific, registered owner.
Any individual or entity which holds a bearer bond is entitled to redeem coupons and collect the principal repayment when the bond matures. This sets bearer bonds apart from conventional bonds, the ownership of which is registered by the company or government entity which issues the bond.
Because bearer bonds are not registered to a specific lender, they are extremely flexible vehicles for the transfer of debt claims. Typically, they can be transferred from one owner to another without the need for a third-party brokerage service. Bearer bond coupons can be redeemed by the bond’s holder at the time that they become due.
The risk of bearer bonds is that there is no way to reclaim them if they are lost or accidentally transferred to another party. Some bearer bonds can be converted to registered bonds upon their bearer’s request.
In Switzerland, bearer bonds are classified as bearer securities. A bearer security is defined as a negotiable security which recognizes the current bearer as its beneficiary.
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