Which municipal bonds are backed by the full faith and credit of the municipality?

• A. General Obligation Bonds
• B. Revenue Bonds
• C. Eurobonds
• D. Sovereign Bonds

Answer: (A)

General obligation bonds are backed by the full faith and credit of the municipality, meaning the issuer pledges its taxing power to repay the debt. This makes them secured by the government’s ability to raise taxes or use other tax revenues if needed, not just revenues from a specific project. Revenue bonds, by contrast, are repaid from the project’s income (like tolls or fees) and aren’t guaranteed by the municipality’s overall taxing authority. Eurobonds are bonds issued outside the issuer’s domestic market and often in a foreign currency, while sovereign bonds are issued by national governments. So the bonds backed by the municipality’s taxing power are general obligation bonds.