Standish Mellon Asset Management
April 06, 2017
Specialist multi-asset investment management firm

The Advantages of Municipal Revenue Bonds

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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