What characterizes a collateral trust bond?

A collateral trust bond is indeed characterized by being a secured bond that is backed by marketable securities owned by the issuer. This means that the bondholder has a claim to the specific financial assets—such as stocks or bonds—owned by the issuer, which serves as collateral. In the event of default, the bondholders can claim those securities, providing them with a level of security against loss.

This type of bond is commonly used when an issuer does not have significant physical assets to pledge as collateral but does possess marketable securities that can be easily liquidated. The backing by marketable securities enhances the creditworthiness of the bond and lowers risk for investors, making it a more attractive investment relative to unsecured bonds or other less secure instruments.