Net bonded debt is the portion of a municipality’s debt that is contracted under the obligation of a bond, as opposed to loans or other forms of financing. Oftentimes, this metric is used to determine a municipality’s capital structure to assess default risks or borrowing capacity.
For example, suppose that a municipality has a high proportion of bonded debt relative to other forms of more lenient financing. In this case, the municipality may be at greater risk since bonds are more difficult to restructure than other forms of debt, such as a bank loan.