what is a bond covenant 
a bond covenant is a legally binding term of agreement between a bond issuer and a bondholder bond covenants are designed to protect the interests of both parties negative or restrictive covenants forbid the issuer from undertaking certain activities positive or affirmative covenants require the issuer to meet specific requirements understanding bond covenantscovenants are often put in place by lenders to protect themselves from borrowers defaulting on their obligations due to financial actions detrimental to themselves or the business all bond covenants are part of a bond s legal documentation and are part of corporate bonds and government bonds a bond s indenture is the portion that contains the covenants both positive and negative and is enforceable throughout the entire life of the bond until maturity possible bond covenants might include restrictions on the issuer s ability to take on additional debt requirements that the issuer provide audited financial statements to bondholders and limitations on the issuer s ability to make new capital investments 