A bond is a
loan that an investor makes to a
borrower. The borrower agrees to pay back the loan, plus interest, over a specified period of time. Bonds are typically issued by governments, companies, and other organisations to raise money.
In the context of securitisations, bonds are often used to finance the purchase of assets. For example, a securitisation may be used to finance the purchase of a pool of
mortgages. The bonds issued by the securitisation will be backed by the payments from the mortgages. This means that investors in the bonds will receive their interest payments and principal repayments as long as the borrowers make their mortgage payments.