prerefunded bond

Prerefunded bond

Refunded bond.

Refunded Bond

A bond whose principal is held in an escrow account, generally invested in Treasury securities or something else risk-free, until such time as the bond matures. That means that there is no possibility of default on the principal; as a result, refunded bonds usually have the highest possible credit ratings. They are also called prerefunded bonds.

prerefunded bond

A bond secured by an escrow fund of U.S. government obligations that is sufficient to pay off the entire issue of refunded bonds at maturity. The rating of the refunded bond generally assumes the rating of the government obligations (highest rating) at the time the fund is established. See also arbitrage bond.
References in periodicals archive ?
Insured or prerefunded bonds also limit credit risk.
NEW YORK -- Due to an oversight, certain recent rating actions performed on prerefunded bonds did not assign a Negative Rating Outlook.
Due to this change in bond security, previous ratings assigned to bonds are no longer relevant and if escrows are properly structured, prerefunded bonds may qualify for an 'AAApre' rating from Fitch," said David Litvack, Managing Director and Chair of Fitch's Public Finance Criteria Committee.
Prerefunded bonds will maintain their 'AAA' rating.