Brady Bonds
What it is:
Brady bonds are U.S. Treasury bonds issued by developing countries in an effort to reduce these countries’ external debt.
How it works/Example:
Named for former U.S. Treasury Secretary Nicholas Brady, Brady bonds were introduced in the late 1980s as part of Brady's initiative to reduce the high debt obligations of emerging economies once they began defaulting on bonds issued by their respective governments.
Each Brady bond is denominated in U.S. Dollars and collateralized by an equal amount of 30-year zero-coupon Treasury bonds. Maturities range from 10 to 30 years with payments at either fixed or adjustable interest rates.