Underlying Debt

Municipal bond lingo pertaining to debt of a government entity that exists within the jurisdiction of a larger government entity. The larger entity has partial responsibility for the debt. A city, for instance, is within the jurisdiction of its state. The state may share responsibility for the city's debt. From the state's standpoint, the debt of the city is underlying debt. The term underlying debt should not be confused with overlapping debt, which is underlying debt whereby the debt exists within equally ranked entities.