Bond Trust Law and Legal Definition

Bond trusts refer to a trust whose principal consists of bonds that yield interest income. Usually the bond trusts issue a set number of units. The trust's primary offering period is closed on completion of sale of the units to the investors. Bond trusts pay monthly income, in relatively consistent amounts, until the first bond in the trust is called or matures. Once this happens the funds from the redemption are distributed to the clients through pro rata return of principal. The trust then continues paying the new monthly income amount until the next bond is redeemed. This continues until all the bonds have been liquidated out of the trust. Bond trusts are generally appropriate for individuals seeking current income and stability of principal.