Municipal Bonds (US) – Types

There are two main types of municipal bond – general obligation, or GO, bonds and revenue bonds. GO bonds are guaranteed by the ‘full faith and credit’ of an issuer with the power to raise taxes, while revenue bonds are secured by the revenues generated by a specific project. A more recent addition to the municipal bond ‘family’ is the Build America Bond (BAB), introduced in 2009 to provide an economic stimulus to flagging municipalities.


In this course, we will look at the main types and sub-types of municipal bond, focusing on the risk factors which investors would look for before committing their funds.


    On completion of this course, you will be able to:

    Describe the main types of municipal bond

    Outline the main variants of traditional municipal bond structures

    Describe the background and key features of Build America Bonds (BABs)


    Topic 1: Types of Municipal Security

    General Obligation Bonds

    o Limited Tax Bonds

    o Unlimited Tax Bonds

    Analysis of GO Bonds

    o Debt Levels

    o Value of Taxable Property

    o Local Economy

    o Budgetary Operations

    o Revenue Structure

    Revenue Bonds

    o Airport Revenue Bonds

    o Land-Secured Bonds (Dirt Bonds)

    o Higher Education Revenue Bonds

    o Toll Revenue Bonds

    o Water Revenue Bonds

    o Hospital Bonds

    o Electric Utility Revenue Bonds

    o Mortgage Revenue Bonds

    o Industrial Revenue Bonds

    o Tobacco Bonds

    o Other Revenue Bonds

    Analysis of Revenue Bonds

    o Sources of Revenue

    o Flow-of-Funds (‘Waterfall’) Structure

    o Covenants

    Other Types of Municipal Bond

    o Pre-Refunded (Advanced Refunding) Bonds

    o Certificates of Participation (COPs)

    o Tax Increment Bonds

    Municipal Notes

    Municipal Commercial Paper (CP)

    Topic 2: Exotic Municipal Bond Structures

    Callable Bonds

    Putable Bonds

    Floaters/Inverse Floaters

    Variable Rate Demand Obligations (VRDOs)

    Auction Rate Securities (ARS)

    Zero-Coupon Bonds (Zeros)

    Topic 3: Build America Bonds (BABs)

    The America Recovery and Reinvestment Act (ARRA)

    Types of BAB

    o Direct Pay Bonds

    o Tax Credit Bonds

    Other Programs

    The success of the BAB Program

    Investing in BABs



    75 Minutes

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