A type of debt instrument that is not secured by physical asset or collateral. Debentures are
backed only by the general creditworthiness and reputation of the issuer. Both corporations and
governments frequently issue this type of bond in order to secure capital. Like other types of
bonds, debentures are documented in an indenture.
Debentures have no collateral. Bond buyers generally purchase debentures based on the belief
that the bond issuer is unlikely to default on the repayment. An example of a government
debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill).
T-bonds and T-bills are generally considered risk free because governments, at worst, can print
off more money or raise taxes to pay these type of debts