Author: , on November 11, 2009

There are several types of municipal bonds but general obligation bonds are the safest. Here's how you can ensure you are purchasing or holding general obligation bonds.

There are several types of municipal bonds. These include revenue bonds and  general obligation bonds.  General obligation bonds are considered the safest because they stipulate that the municipality can must use its tax resources in order to pay interest on the bond. If the city, state, or government ever gets into financial problems, it must first cut services or raise taxes in order to meet its debt obligations. but general obligation bonds are the safest. Here's how you can ensure you are purchasing or holding general obligation bonds. Revenue bonds on the other hand are used to finance more speculative projects such as stadiums or toll roads. They do not have the same tax-payer backing.

If you're buying a municipal bond for its safety then you should be sure it is a general obligation bond. How do you do that? Check the municipal bond database called Electronic Municipal Market Access (Emma). Emma provides all of the bond offering info and you can search for municipal bonds by name or CUSIP. The accompanying documentation will tell you the type of municipal bond.

Comments

  • Rajiv Gothra

    November 12, 2009

    While GOs are generally safest, some revenue bonds are also backed by solid assets and unlimited taxing authority.

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