Bond Bank

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.

BREAKING DOWN '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. Bail-In

    Rescuing a financial institution that is on the brink of failure ...
Related Articles
  1. Taxes

    Why Retirees Can't Count on Muni Bonds

    Interest may not be tax-exempt for seniors with Medicare or Social Security benefits.
  2. Bonds & Fixed Income

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  3. Bonds & Fixed Income

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
  4. Taxes

    Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  5. Options & Futures

    Municipalities Free Up Cash With Chapter 9

    Find out what happens to municipalities when they need money, but have no other option than bankruptcy.
  6. Stock Analysis

    Top 5 Stocks Listed on the Australian Securities Exchange for 2016 (RIO)

    Uncover five of the stocks listed on the Australian Stock Exchange (ASX) that offer investors the highest potential for above-average profits in 2016.
  7. Budgeting

    Beer of the Month Subscription Review: Is It Worth It?

    Learn how you can get access to some of the best craft beers produced in the world, delivered right to your front door every month.
  8. Fundamental Analysis

    Will Health Care Continue to Drive IPOs in 2016?

    Learn why health care IPOs may be slowing in 2016, and how Obamacare, poor previous filings and economic factors are affecting the health care sector.
  9. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  10. Mutual Funds & ETFs

    Top 4 Royce Funds for Retirement Diversification in 2016

    Discover four of The Royce Funds mutual funds suitable for diversifying retirement portfolios that focus on investing in small-cap companies.
RELATED FAQS
  1. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  2. What is arbitrage?

    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. ... Read Full Answer >>
  3. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  4. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  5. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  6. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center