Bond covenants are used to address the riskiness of bonds.

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Bond covenants are legal restrictions and requirements placed on bond issuers by bondholders to mitigate the risk of default or other negative events. These covenants can include requirements for maintaining certain financial ratios, limitations on additional debt and investments, and restrictions on certain actions by the issuer. The use of covenants helps to make bonds more attractive to investors, as they provide a level of assurance that the issuer will meet their obligations.

Bond Covenants Are Used to Address the Riskiness of Bonds