The words that describe bonds have very specific meanings. Like the word security , which once meant the written record of an investment, the word bond once referred to the piece of paper that described the details of a loan transaction. Today the term is used more generally to describe a vast and varied market in debt securities. An asset-backed bond can be created when a securities firm bundles some type of debt, like mortgages or credit card debt, and sells investors the right to receive the payments that consumers are making on those loans.
Debentures are the most common corporate bonds.
They're backed by the credit of the issuer, rather than by any specific assets. Though they sound riskier, they're generally not. The debentures of reliable institutions are typically more highly rated than asset-backed bonds. Pre-refunded bonds are corporate or municipal bonds, usually AAA rated, whose repayment is guaranteed by the funds from a second bond issue. Proceeds from the secondary issue are usually invested in safe U.S. Treasury issues.