We have changed our privacy policy. In addition, we use cookies on our website for various purposes. By continuing on our website, you consent to our use of cookies. You can learn about our practices by reading our privacy policy.
© 2016 Shmoop University, Inc. All rights reserved.

Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Adjustment Bond


An adjustment bond can choose to pay interest—or not—at will. If the responsible party for the bond punts a payment, they don't go into default—they just keep rollin' over.

Now you might be thinking, “Why would anyone want an adjustment bond when there are bonds that promise to pony up cash faithfully?” Good question. Adjustment bonds are usually issued when a company is facing bankruptcy or is restructuring. If you’re popping antacids like Tic Tacs because you have bonds that might be useless if a company goes under, you (and other bondholders) might get adjustment bonds if the company is really struggling.

It eases up some pressure on the company by letting them pay off what they owe, and it means you might get at least some of your cash (and some of your expected returns) back. It’s better than nothing, which is what you’d get with a bankruptcy and no adjustment bonds.