DEFINITION of 'Unlimited Tax Bond'

A municipal bond that is backed by the pledge of the issuer (generally a city or municipality) to raise taxes, without limit, to service the debt until it is repaid. Because of this feature, unlimited tax bonds may have higher credit ratings and offer lower yields than other comparable municipal bonds of the same maturity.

BREAKING DOWN 'Unlimited Tax Bond'

While the issuer of unlimited tax bonds in theory can raise taxes at an unlimited rate, in practice it may be difficult to raise taxes beyond a certain point. One of the factors that credit analysts use to rate such bonds is the ability of the issuer to enforce penalties against and recover taxes from delinquent taxpayers.

RELATED TERMS
  1. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  2. Municipal Bond Fund

    A mutual fund that invests in municipal bonds, or "munis." Municipal ...
  3. Fully Taxable Equivalent Yield

    The yield on a municipal bond, when the effect of reduced taxes ...
  4. Taxable Municipal Bond

    A fixed-income security issued by a local government such as ...
  5. Triple-Tax-Free

    An investment (usually a municipal bond) featuring interest payments ...
  6. Double Barreled

    A municipal general obligation bond in which the cash flows are ...
Related Articles
  1. Investing

    Do Municipal Bond Mutual Funds Offer a Tax Incentive?

    Learn about individual municipal securities and municipal bond funds, whose principal stability and tax-free yield appeal to high-income investors.
  2. Investing

    A Look at the Pros and Cons of Muni Bonds

    Considering muni bonds? Here's a look at their pros and cons.
  3. Investing

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  4. Financial Advisor

    Muni Bonds, Taxable Bonds or CDs: Which is Best?

    Here's how to tell if municipal bonds are a better investment than taxable bonds or CDs.
  5. Investing

    Consider These Municipal Bond ETFs

    Though relatively low-risk, there are still some factors to consider when taking the plunge into municipal bond ETFs.
  6. Investing

    Think Twice Before Buying Tax-Free Municipal Bonds

    Municipal bonds are relatively safe, tax-exempt securities--but they are not without drawbacks. Due diligence is required.
  7. Investing

    Should You Consider Muni Bonds?

    Municipal bonds come in two types. General obligation bonds repay their holders through taxes. They often have low interest rates, but they’re safe.
  8. Investing

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  9. Investing

    Taxation Rules for Bond Investors

    Several factors affect the taxable interest that must be reported. Learn more here.
  10. Investing

    The Top 5 Municipal Bond ETFs for 2016

    Learn about exchange-traded funds that invest in municipal bonds issued by local U.S. municipalities with returns on bonds exempted from federal tax.
RELATED FAQS
  1. 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 >>
  2. How are municipal bonds taxed?

    Discover information about trading municipal bonds, specifically the various tax implications municipal bonds have at state ... Read Answer >>
  3. What is a triple tax-free municipal bond?

    At its core, a triple tax-free municipal bond is just like any corporate bond: it is a debt instrument, a loan given to a ... Read Answer >>
  4. 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 >>
  5. How can you use a debt service coverage ratio (DSCR) to evaluate municipal bonds?

    Learn how the debt service coverage ratio (DSCR) can be used by investors to analyze the risk level of revenue bonds offered ... Read Answer >>
  6. How stable are municipal bonds?

    Read about the safety and stability of the municipal bond market, and learn how that stability has been undermined since ... Read Answer >>
Hot Definitions
  1. Debt/Equity Ratio

    Debt/Equity Ratio is debt ratio used to measure a company's financial leverage or a debt ratio used to measure an individual ...
  2. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  3. Life Insurance

    A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the ...
  4. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
Trading Center