Arbitrage Bond

Business, Legal & Accounting Glossary

Definition: Arbitrage Bond


Arbitrage Bond


Full Definition of Arbitrage Bond


A bond issued by a municipality to take advantage of a disparity in interest rates between two different debt instruments. For example, a municipality issues an arbitrage bond at a lower interest rate and for a shorter term than one of its own existing debt securities. It then might use the assets raised by the arbitrage issue to buy Treasury securities that are paying a higher interest rate than its own issue. Prior to maturity of its own higher-rate issue, the municipality will sell the Treasury securities and pay off the debt on the arbitrage bond, profiting from the difference.


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Definition Sources


Definitions for Arbitrage Bond are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 20th November, 2021 | 0 Views.