A bond whose principal and interest are paid using moneys held in an escrow account, as originally scheduled through the final maturity date of the bond, rather than being recalled prior to maturity. This usually involves a de facto defeasance of a municipal bond with Treasury securities placed in escrow in order to meet all coupon and principal payments. If a bond is escrowed to maturity, the maturity date and maturity payment maintain the original terms of the bond except that any call options are deactivated on the date of the defeasance. In other words, interest is paid to bondholders and the principal is paid off at the original maturity date, not the early call date.
This bond is also known as a pre-funded bond or for short as an ETM bond.
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