Stable credit characteristics and potential yield advantage build a case for favoring revenue bonds over general obligation bonds
- Revenue bonds comprise around two-thirds of the municipal bond universe and provide stable quality and attractive income from debt financings of vitally essential projects.
- We believe that fundamental credit risk for most revenue bonds is stable in weak economic periods due to the essentiality or quasi-essential nature of the project.
- Revenue bond issuers ("public corporations") are not as labor intensive as state/local governments, and therefore are not experiencing the growing pension-funding gaps, which may have negative implications for general obligation (GO) debt.
- Infrastructure financing in the US has long relied on the municipal-bond market, with revenue-bond issuance a key source of funding for those projects.
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