Guaranteed Bond

A type of bond in which the interest and principal on the bond are guaranteed to be paid by a firm other than the issuer of the bond.

Investopedia Says:
This guarantee limits the impact on bondholders if the issuer of the bond goes into default.

For example, in Canada, bonds issued by crown corporations are guaranteed by the federal government. If the issuer defaults on the debt obligation, the government is on the hook for the interest and principal payments.

Related Links:
Investing in bonds - What are they, and do they belong in your portfolio? Bond Basics Tutorial
Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money! Debt Reckoning

Bond on which the principal and interest are guaranteed by a firm other than the issuer. Such bonds are nearly always railroad bonds, arising out of situations where one road has leased the road of another and the security holders of the leased road require assurance of income in exchange for giving up control of the property. Guaranteed securities involved in such situations may also include preferred or common stocks when dividends are guaranteed. Both guaranteed stock and guaranteed bonds become, in effect, Debenture (unsecured) bonds of the guarantor, although the status of the stock may be questionable in the event of Liquidation. In any event, if the guarantor enjoys stronger credit than the railroad whose securities are being guaranteed, the securities have greater value.

Guaranteed bonds may also arise out of parent-subsidiary relationships where bonds are issued by the subsidiary with the parent's guarantee.