DEFINITION of 'Private Activity Bond - PAB'

Tax-exempt bonds issued by or on behalf of local or state government for the purpose of providing special financing benefits for qualified projects. The financing is most often for projects of a private user, and the government generally does not pledge its credit.

BREAKING DOWN 'Private Activity Bond - PAB'

These bonds are used to attract private investment for projects that have some public benefit. (There are strict rules as to which projects qualify.) This type of a bond results in reduced financing costs because of the exception of federal tax.

RELATED TERMS
  1. Private Purpose Bond

    A type of municipal bond that is issued to finance a project ...
  2. Project Finance

    Defined by the International Project Finance Association (IPFA) ...
  3. Project Completion Restriction

    A type of clause, seen most often in municipal bond indentures, ...
  4. Tax-Exempt Interest

    Interest income that is not subject to federal income tax. Tax-exempt ...
  5. Taxable Municipal Bond

    A fixed-income security issued by a local government such as ...
  6. Government Bond

    A debt security issued by a government to support government ...
Related Articles
  1. Investing

    How To Choose The Right Bond For You

    Bond investing is a stable and low-risk way to diversify a portfolio. However, knowing which types of bonds are right for you is not always easy.
  2. Investing

    What Does Finance Cover?

    Finance is the study of banking, leverage, credit, capital markets, money and investments, along with how they are used by individuals and companies.
  3. Investing

    The Basics Of Investing In Foreign Government Bonds

    Individuals contemplating the purchase of government bonds need to understand the risks of bond investing.
  4. Investing

    The Best Bet for Retirement Income: Bonds or Bond Funds?

    Retirees seeking income from their investments typically look into bonds. Here's a look at the types of bonds, bond funds and their pros and cons.
  5. Investing

    Savings Bonds For Income And Safety

    Bonds offer undeniable benefits to investors, including safety and tax advantages.
  6. Investing

    Find The Right Bond At The Right Time

    Find out which bonds you should be investing in and when you should be buying them.
  7. Investing

    Investing in Bonds: 5 Mistakes to Avoid in Today's Market

    Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
  8. Retirement

    How to Pick the Right Bonds For Your IRA

    Learn about the best types of bonds to include in an IRA depending on an investor's risk tolerance. Understand the tax benefits of holding bonds in an IRA.
  9. Investing

    Spice Up Your Portfolio With International Bonds

    Going global can add flavor and diversity to an otherwise bland basket of bonds.
  10. Investing

    U.S. Corporate Bonds: The Last Safe Place to Make Money

    There aren't many other sources right now for relatively safe, steady income.
RELATED FAQS
  1. What forms of debt security are available for the average investor?

    Discover the various different types of debt securities, issued by government entities or corporations, that are available ... Read Answer >>
  2. Why should I keep records on my tax-exempt bond transactions?

    Keep your purchase records on all investments, including tax-exempt bonds. Though the interest is tax-free, you may owe taxes ... Read Answer >>
  3. How are municipal bonds taxed?

    Discover information about trading municipal bonds, specifically the various tax implications municipal bonds have at state ... Read Answer >>
  4. Who or what is backing municipal bonds?

    Learn about the basics of municipal bonds, including the various revenue sources that are utilized to back or secure municipal ... Read Answer >>
  5. How can I find tax-exempt mutual funds?

    Learn about finding tax-free mutual funds at major investment firms, including how tax-free funds work and what you should ... Read Answer >>
Hot Definitions
  1. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  2. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  3. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  4. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  5. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  6. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
Trading Center