A highly speculative bond whose company has little or no chance of survival, and as such is mistaken for dead. Put another way, a zombie bond is a seasoned bond issued by a company that is in a shaky status and is already on its knees. Therefore, it cannot pay interest and principal whether now or in the very near future. When a broker/ dealer spots zombie symptoms in a company whose bonds are held in his inventory, he would move to dump as soon as he can. The broker instructs his sales force to get rid of the bonds. In turn, the salesmen contact their clients, advising them to sell their holdings of the bond, especially to unsuspecting customers. However, categorizing a bond as a walking dead is up to the bond investor. After all, each investor has his own judgment and calculations that frame his decision as to hold or dump such a bond.

A prime example of a zombie bond is the issue of GMAC in 2009. Without its government support, GMAC would be categorized as dead.