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General Obligation Vs Revenue Bonds
This reflects the narrower revenue stream available to pay the bonds.
Municipal bonds go vs revenue. The difference between them lies in how the government issuer secures the money to repay the bondholders. General obligation bonds or gos are municipal bonds that are financed by the municipal tax revenue. Municipal bonds generally can be classified into two camps general obligation bonds and revenue bonds. Go premium for free.
The two types of municipal bonds are general obligation bonds and revenue bonds. However all other things being equal general obligation municipal bonds are safer and less likely to default than revenue municipal bonds. Gos have debt limits to protect taxpayers from higher taxes. The municipal bond market was in great shape prior to the covid 19 outbreak.
A municipality can always issue more bonds or raise taxes to pay off a go issue while a revenue bond is restricted to a single revenue stream. Revenue bonds are financed by the income generating facilities that the bonds are for. Login type text name b 7eab376f4a9b7d1d63580ce58 d7427882c9. The key difference between these two types of municipal also known as muni bonds is the source of the revenue used to make the bond s interest and principal payments.
After the passage of. A revenue bond could be issued for for example the drilling of an oil site. An in depth look at general obligation and revenue bonds. A general obligation bond could be for the funding of low income housing or schools.
General obligation or go bonds are backed by the general revenue of the issuing municipality while revenue bonds are supported by a specific revenue source such as income from a toll road hospital or higher education system. In this case it depends on the specifics of the municipal bond issue you are considering buying or selling as well as the price at which you enter into a transaction. In general for municipalities both are considered to be important as a means to finance needed capital projects for the citizens in the issuing locality. However some municipalities are not well capitalized and sometimes income streams dry up.
Revenue bonds are often rated very close to a city s general obligation rating but usually slightly below it.
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