Final answer:
Covenants are clauses in bond contracts that specify the rights of bondholders and the obligations of the issuer.
Step-by-step explanation:
In the context of bonds, clauses that specify the rights of the bondholders and any actions that the issuer is obligated to perform or is prohibited from performing are called covenants. Covenants are contractual agreements in the bond indenture that protect the interests of the bondholders and ensure that the issuer meets its obligations.
For example, a covenant could stipulate that the issuer must maintain a certain level of financial performance or restrict the issuer from taking certain actions, such as selling major assets without bondholder approval.