Unlimited Tax Bond


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.

  1. Maintenance Bond

    A type of surety bond purchased by a contractor that protects ...
  2. Municipals-Over-Bonds Spread - ...

    The difference in yields between a municipal bond and a Treasury ...
  3. Tax-Exempt Security

    A security in which the income produced is free from federal, ...
  4. Tax-Equivalent Yield

    The pretax yield that a taxable bond needs to possess for its ...
  5. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  6. Bond Laddering

    A portfolio management strategy and model for investing in fixed ...
Related Articles
  1. Bonds & Fixed Income

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  2. Taxes

    Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  3. Options & Futures

    Top 4 Strategies For Managing A Bond Portfolio

    Find out how these strategies work and how you can put them to work for you.
  4. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  5. Bonds & Fixed Income

    What are Treasury STRIPS?

    STRIPS is an acronym that stands for Separate Trading of Registered Interest and Principal Securities.
  6. Bonds & Fixed Income

    What's a 10-Year Treasury Note?

    A 10-year Treasury note is an intermediate debt obligation issued by the United States government, and with a ten-year maturity date.
  7. Mutual Funds & ETFs

    Top 3 China Bonds ETFs

    Explore detailed analysis of three exchange-traded funds (ETFs) that track the Chinese bond market, and learn about the suitability and characteristics of these ETFs.
  8. Mutual Funds & ETFs

    Top 4 Treasurys ETFs

    Learn about the specifics of the top four U.S. Treasury ETFs and how investors can buy ETFs that invest in bonds along the yield curve.
  9. Mutual Funds & ETFs

    Top 5 TIPS ETFs

    Learn about exchange-traded funds that invest in U.S. Treasury inflation-protected securities of different durations and yields to maturity.
  10. Mutual Funds & ETFs

    Top 4 Ultrashort Bond Mutual Funds

    Explore analysis of some of the top mutual funds tracking the ultrashort duration bond market, and learn about their characteristics and suitability.
  1. 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 Full Answer >>
  2. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
  3. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  4. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>
  5. How stable are municipal bonds?

    Stability is relative in the municipal bond market. Municipal bonds tend to be safer than many other types of investments, ... Read Full Answer >>
  6. What does it signify if the term structure of an interest rate's curve is positive?

    When the term structure of interest rates is positive, it is a signal to economists the short-term yields on similar bonds ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!