What is Brady Bond?

US dollar-denominated bond issued by the government of a developing country usually in Latin America. It has been created to reduce the debt in emerging markets due to large default rate. Brady bonds are usually collaterized by the US Treasury zero-coupon bonds that are bought by the debtor country. They are named after the US Treasury Secretary Nicholas Brady, who was involved in the debt-reduction program. There are various types of brady bonds like par bonds or new-money bonds.