U.S. dollar-denominated bond issued by an Emerging market, particularly those in Latin America, and collateralized by U.S. Treasury zero-coupon bonds. Brady bonds arose from an effort in the 1980s to reduce the Debt held by less-developed countries that were frequently defaulting on Loan. The bonds are named for Treasury Secretary Nicholas Brady, who helped International monetary organizations institute the Program of debt-reduction. Defaulted loans were converted into bonds with U.S. zero-coupon Treasury bonds as Collateral. Because the Brady bonds were backed by Zero-coupon bond, repayment of Principal was Insured. The Brady bonds themselves are coupon-bearing bonds with a variety of rate options (fixed, variable, step, etc.) with maturities of between 10 and 30 years. Issued At par or at a discount, Brady bonds often include warrants for raw materials available in the country of origin or other Option.
