A debt security is an investment that carries debt and can be bought and sold on an open market. Governments, corporations, and organizations issue debt, and investors act as lenders.
What is a debt security?
Debt securities come with the obligation that issuers will repay lenders the entire principal with an agreed-upon interest rate. The most common type of debt securities are fixed-income securities, like bonds. Preferred stocks and mortgage-backed securities are also debt securities. Bank loans aren’t considered debt securities because they are nonnegotiable.