Obligation Bond

DEFINITION of 'Obligation Bond'

A municipal bond used to secure a mortgage on property or other physical assets that can be liquidated. The face value of the bond is greater than the value of the property itself.

BREAKING DOWN 'Obligation Bond'

An obligation bond creates a personal obligation on the part of the borrower to compensate the lender for costs in excess of the value of the mortgaged property or assets, such as closing costs or transaction costs.

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RELATED FAQS
  1. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  2. How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par ... Read Answer >>
  3. Should investors focus more on the current yield or face value of a bond?

    Find out when investors should focus on a bond's current yield versus its face value, including an example of how current ... Read Answer >>
  4. Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate ... Read Answer >>
  5. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
  6. What is the difference between municipal bonds and standard money market funds?

    The primary difference between municipal bonds - also known as "munis" - and money market funds is that municipal bonds are ... Read Answer >>
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