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
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    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
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    Learn more about municipal bonds, including the various types of bonds issued and the purposes of municipal bond funds, such ... Read Answer >>
  3. Who or what is backing municipal bonds?

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  4. What determines the price of a bond in the open market?

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  5. How does face value differ from the price of a bond?

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