Moral obligation bond

Moral obligation bond

A tax-exempt bond issued by a municipality or a state financial intermediary that is backed by the moral, but not legal, obligation of a state government to appropriate funds in case of default .
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Moral Obligation Debt

A municipal bond or another government bond that is not secured by the full faith and credit of the issuer. Unlike general obligation bonds, which are secured in this way, moral obligation bonds carry higher risk and, therefore, a higher yield. However, because they are still government bonds, their interest is usually deductible from federal income taxes.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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