A debt security is a type of financial asset that is created when one party lends money to another. For example, corporate bonds are debt securities issued by corporations and sold to investors. Investors lend money to corporations in return for a pre-established number of interest payments, along with the return of their principal upon the bond's maturity date.

Government bonds, on the other hand, are debt securities issued by governments and sold to investors. Investors lend money to the government in return for interest payments (called coupon payments) and a return of their principal upon the bond's maturity.

Debt securities are also known as fixed-income securities because they generate a fixed stream of income from their interest payments. Unlike equity investments, in which the return earned by the investor is dependent on the market performance of the equity issuer, debt instruments guarantee that the investor will receive repayment of their initial principal, plus a predetermined stream of interest payments.