Bond Bank

AAA

DEFINITION of 'Bond Bank'

A state-level entity that provides that state's smaller public entities with debt financing at a lower cost than what the small entity could obtain on its own. Bond banks serve cities, municipalities, schools, hospitals, water and sewer districts, and more. They are able to provide lower-cost financing as long as they have higher credit ratings than the entities that seek to borrow.

INVESTOPEDIA EXPLAINS 'Bond Bank'

Not all U.S. states have bond banks. States that do include, but are not limited to: Maine, Indiana, Idaho, New Hampshire, New York and Alaska. Vermont was the first state to establish a bond bank. In some cases, bond banks make it possible for an entity that otherwise could not obtain financing to get it. For example, investors might be reluctant to invest in the municipal securities of a small town with limited resources, but eager to invest in munis issued by a larger entity with significant resources like a bond bank. Bond banks can also pool together a number of small offerings to provide investors with a more attractive diversified product.

RELATED TERMS
  1. Taxable Municipal Bond

    A fixed-income security issued by a local government such as ...
  2. Citizen Bond

    A type of certificateless municipal bond used to finance local ...
  3. Municipal Bond Fund

    A mutual fund that invests in municipal bonds, or "munis." Municipal ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  5. Revenue Bond

    A municipal bond supported by the revenue from a specific project, ...
  6. Premium to Surplus Ratio

    Net premiums written divided by policyholders’ surplus. The premium ...
Related Articles
  1. Bonds & Fixed Income

    The Basics Of Municipal Bonds

  2. Bonds & Fixed Income

    Find The Right Bond At The Right Time

  3. Taxes

    Avoid Tricky Tax Issues On Municipal ...

  4. Taxes

    Why Retirees Can't Count On Muni Bonds

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center