Lottery Bond


Lottery Bond

1. A bond guaranteed by the proceeds from a lottery. That is, an agency (usually a government agency) collects revenue from a lottery and uses this revenue to secure the bond. This reduces the risk to the bondholder that the bond will default.

2. A bond with a provision stating that the issuer will redeem a certain number of bonds at a premium to their face value. For example, an issuer may sell 10,000 bonds with a face value of $1,000 each, and then announce that it will redeem 2,000 of them for $1,300 at maturity. A lottery bond exists to attract investors because it otherwise has no special features and usually carries a rather low coupon rate. Lottery bonds are issued by a number of European governments, notably France and Belgium.