The Advantages of Municipal Revenue Bonds

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Municipal Revenue Bonds

Daniel Marques, CFA

Daniel Marques, CFA - Senior Portfolio Manager and Director of Individual Portfolio Management

Stable credit characteristics and potential yield advantage build a case for favoring revenue bonds over general obligation bonds

 Executive Summary

  • 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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