DEFINITION of 'Clinton Bond'

A debt investment that is said to have no principal, no interest and no maturity value. A Clinton bond is in reference to President Bill Clinton's low-interest-rate policies that had bondholders lose billions of dollars early in his presidency. Inflation fears caused yields to increase temporarily, and the bond market collapsed. These fears were unfounded, however, with Clinton choosing to balance the budget instead of increasing the federal deficit, allowing bond prices to recover.

BREAKING DOWN 'Clinton Bond'

Former President Bill Clinton's well-documented "extravagances" formed the foundation for this type of bond. Clinton bonds are also known as "Quayle bonds", named after former Vice-President Dan Quayle. This rarely seen slang term is more often used to make a point, than to actually represent a market bond.

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