Moral Obligation Bond

A type of revenue bond issued by a municipality or similar government body. A moral obligation bond not only gives investors the tax exemption benefits inherent in a municipal bond, but also provides an additional moral pledge of commitment against default. The issuing body's commitment is supported by a reserve fund established to meet any debt service costs the government may be unable to make.

It is important to note that with a moral obligation bond, the additional security provided by the government is only morally - and not legally - binding. However, the pledge is generally regarded as being as credible as a legally binding promise because the issuing government would face negative credit rating effects if it failed to honor the pledge.


Investment dictionary. . 2012.

Look at other dictionaries:

  • moral obligation bond — Revenue bonds issued by state agencies, government commissions, or other special purpose municipal entities that purport to have the added backing of a moral obligation of the city or state government. Since there is no legal obligation for the… …   Financial and business terms

  • Obligation — • Defined in the Institutes of Justinian as a legal bond which by a legal necessity binds us to do something according to the laws of our State Catholic Encyclopedia. Kevin Knight. 2006. Obligation     Obligation …   Catholic encyclopedia

  • obligation — ob·li·ga·tion /ˌä blə gā shən/ n 1: a promise, acknowledgment, or agreement (as a contract) that binds one to a specific performance (as payment); also: the binding power of such an agreement or indication held that the amendment did not… …   Law dictionary

  • obligation — A generic word, derived from the Latin substantive obligatio, having many, wide, and varied meanings, according to the context in which it is used. That which a person is bound to do or forbear; any duty imposed by law, promise, contract,… …   Black's law dictionary

  • Bond — (b[o^]nd), n. [The same word as band. Cf. {Band}, {Bend}.] 1. That which binds, ties, fastens, or confines, or by which anything is fastened or bound, as a cord, chain, etc.; a band; a ligament; a shackle or a manacle. [1913 Webster] Gnawing with …   The Collaborative International Dictionary of English

  • Bond creditor — Bond Bond (b[o^]nd), n. [The same word as band. Cf. {Band}, {Bend}.] 1. That which binds, ties, fastens, or confines, or by which anything is fastened or bound, as a cord, chain, etc.; a band; a ligament; a shackle or a manacle. [1913 Webster]… …   The Collaborative International Dictionary of English

  • Bond debt — Bond Bond (b[o^]nd), n. [The same word as band. Cf. {Band}, {Bend}.] 1. That which binds, ties, fastens, or confines, or by which anything is fastened or bound, as a cord, chain, etc.; a band; a ligament; a shackle or a manacle. [1913 Webster]… …   The Collaborative International Dictionary of English

  • Bond of a slate — Bond Bond (b[o^]nd), n. [The same word as band. Cf. {Band}, {Bend}.] 1. That which binds, ties, fastens, or confines, or by which anything is fastened or bound, as a cord, chain, etc.; a band; a ligament; a shackle or a manacle. [1913 Webster]… …   The Collaborative International Dictionary of English

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  • Obligation — Ob li*ga tion, n. [F. obligation. L. obligatio. See {Oblige}.] 1. The act of obligating. [1913 Webster] 2. That which obligates or constrains; the binding power of a promise, contract, oath, or vow, or of law; that which constitutes legal or… …   The Collaborative International Dictionary of English

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