Revenue Bond
A municipal bond repaid only from the revenue of a specific project.
What is Revenue Bond?
Backed by user fees from the financed facility - tolls, airport fees, water charges - not by taxes. No voter approval is required; a feasibility study supports the issue instead. Generally riskier than a GO bond from the same issuer, since the project must succeed.
Revenue Bond: a worked example
A toll road authority repays its bonds from toll collections.
More terms in Bonds & Cash Equivalents
Certificate of Deposit (CD)
A bank time deposit paying a fixed rate for a fixed term, FDIC insured.
Commercial Paper
Unsecured short-term corporate debt, 270 days or less.
Treasury Inflation-Protected Securities (TIPS)
Treasuries whose principal adjusts with the CPI.
Zero-Coupon Bond
Sold at a deep discount, pays no interest, matures at par.
Asset-Backed Securities (ABS / MBS)
Bonds backed by pools of loans - mortgages, auto loans, credit cards.
General Obligation (GO) Bond
A municipal bond backed by the issuer's full faith, credit, and taxing power.
Insured Municipal Bond
A muni with third-party insurance guaranteeing principal and interest.
Municipal Bond Tax Treatment
Interest usually federally tax-free; gains are not.