A registered bond is a bond which has been issued to an investor and includes some sort of record of the proper owner of the bond. This is in contrast to a bearer bond, which affords the principal and coupon payments of the bond to whatever person is holding, or "bearing," the bond. If a registered bond is an actual physical certificate, it will contain the name and pertinent information of the owner on the front of the bond. Modern bonds are often registered electronically through computers, allowing for companies that issue bonds to know exactly who owns those bonds.
Bonds are favored by investors who like to have a little bit more stability than stocks and wish to receive regular payments. Corporations, governments, and other bond issuers use the bonds to raise funds. An investor who buys a bond is due the eventual return of the initial payment, known as the principal, as well as interest payments at the percentage rate, also known as the coupon, determined at the start of the bond agreement. Knowing which investors are due these payments is crucial to the relationship between investor and issuer. A registered bond solves this problem.
The basic distinction of a registered bond is that it includes the information of the actual owner of the bond. This information includes, first and foremost, the name and address of the bondholder. It allows issuers to know where to send interest and principal payments when they are due. When this type of bond is sold, the third-party administering the transaction must be notified so that the new owner's information can be collected.
In some cases, a registered bond is a piece of paper that has the bondholder's information printed right on the front of it. These bonds are rare in modern times, with most bond transactions taking place without any physical bond existing. A virtual paper trail is created by these electronic transactions which identifies the bondholders.
One of the main benefits of a registered bond is that it removes any doubt about the rightful owner of the bond. The same cannot necessarily be said about a bearer bond, which entitles the person physically holding the bond to any coupon or principal payments due on the bond. Such bonds are difficult to track for the issuers when it comes time to payment, and they leave open the possibility for duplicity or theft depriving rightful bondholders of their benefits.