Bearer negotiable instruments (BNIs) are non-cash monetary instruments which may contain the instruction ‘pay to the bearer’. BNIs are defined as cheques, promissory notes, traveller’s cheques, bearer bonds, money orders, postal orders and other negotiable instruments. The bearer is the person in possession of the BNI.
Bearer Bonds ordered through this website differ from traditional bonds in that they are unregistered investment securities, consequently no records exist that list the owners’ names other than the initial recipient. As a result, whoever physically holds the bond at the time of redemption, is the presumed owner. Hence the name bearer bonds.
Here is an example of the front of a Bearer Bond the terms & conditions are spelt out on the back of the certificate. Click on image to enlarge:
Investing in Bearer Bonds
When you invest in bearer bonds, you are lending money to a company or a small business (sole trader). In return, you get cumulative interest payments, called coupon payments. If you hold the bond until maturity, you get back the face value of the bond plus the accumulated interest.
Bearer bonds have a degree of risk, as if the company or sole trader goes out of business, you may not get your principal back or the accumulated interest. To compensate for this, bearer bonds usually offer higher interest rate than other debt securities.
However, bearer bonds issued from a company are still less risky than shares. This is because if a company collapses, bond holders, like preference shareholders, are paid out before ordinary shareholders.
When you order bearer bonds from us they will usually have the following characteristics:
- Face values starting from $5,000 up to $100,000 or more per bearer bond;
- The issuer’s name;
- The payee’s name and/or ‘pay to the bearer’;
- An interest (coupon) rate, usually cumulative;
- An anti-counterfeiting encrypted water mark;
- A maturity date.
A bearer bond issued to the person who originally purchased the bond from the issuer and whose name and address appears on the bond, may not be the current bearer.
Where the current bearer’s name does not physically appear on a bearer bond, it’s nearly impossible to recover such bonds if they’re lost or destroyed. This is why we recommend that bearer bonds should be locked away inside a safe or other secure location.
Bearer bonds are easily transferable anonymous debt instruments that hold certain advantages over other forms of currency.