Legal Definitions - full-faith-and-credit bond

Definition: A full-faith-and-credit bond is a type of bond that is backed by the full faith and credit of the issuer, usually a government entity. This means that the issuer pledges to use all available resources to repay the bondholders, including raising taxes if necessary.

Example: A city issues a full-faith-and-credit bond to finance the construction of a new school. The bondholders are assured that the city will use all available resources to repay the bond, including raising taxes if necessary.

Explanation: The example illustrates how a full-faith-and-credit bond works. The bond is backed by the full faith and credit of the issuer, which means that the issuer pledges to use all available resources to repay the bondholders. In this case, the city is the issuer and the bond is being used to finance the construction of a new school. The bondholders are assured that the city will use all available resources to repay the bond, including raising taxes if necessary. This makes the bond a relatively safe investment, as the bondholders are unlikely to lose their investment even if the city experiences financial difficulties.