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. Revenue Bond

    A municipal bond supported by the revenue from a specific project, ...
  5. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  6. Holacracy

    A holacracy is a system of governance where members of a team ...
RELATED FAQS
  1. How can I increase my standard of living in my retirement years?

    If you're decades away from retirement, the best way to ensure a decent standard of living during your golden years is to ... Read Full Answer >>
  2. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  3. Can I get a tax credit from conducting research and development?

    It is possible for a company to qualify for a research and development tax credit for conducting research and development. ... Read Full Answer >>
  4. What is the relationship between research and development and innovation?

    Although it's possible to achieve innovation without research and development and it's possible to conduct research and development ... Read Full Answer >>
  5. What happens to the company stock if a subsidiary gets spun off?

    When a subsidiary gets spun off, the company's stock tends to drop. However, the investor in the stock does not lose any ... Read Full Answer >>
  6. What are some benefits of a mixed economic system?

    In economic theory, a mixed economic system is a combination of capitalism and socialism, allowing for private property along ... Read Full Answer >>
Related Articles
  1. 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.
  2. 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.
  3. Taxes

    Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  4. Taxes

    Why Retirees Can't Count On Muni Bonds

    Interest may not be tax-exempt for seniors with Medicare or Social Security benefits.
  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. Savings

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  7. Economics

    What is a Resident Alien?

    A resident alien is a foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship.
  8. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  9. Economics

    Explaining Protectionism

    Protectionism is government measures that limit imports into a country to protect commerce within that country against foreign competition.
  10. Economics

    Understanding Organizational Behavior

    Organizational behavior is the study of how humans interact in group environments.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!