Page 49 - FINAL CFA SLIDES DECEMBER 2018 DAY 15

Session Unit 16:
55. Fundamentals of Credit Analysis (C/B/A)
Non-Sovereign Government Bonds: this is issued by local governments (cities, states, and counties) and

quasi-governmental entities:
• Municipal bonds are a significant part of the overall U.S. bond market. Interest payments from

municipal bonds are most often exempt from national income taxes. Default rates for municipal
bonds are very low relative to general corporate bonds. Most municipal bonds can be classified as
general obligation bonds or revenue bonds.

• General obligation (GO) bonds are unsecured bonds backed by the full faith credit of the
issuing governmental entity, which is to say they are supported by its taxing power.
• Revenue bonds are issued to finance specific projects, such as airports, toll bridges, hospitals,
tanties
and power generation facilities (higher credit risk than GO bonds –as revenue is the sole source
of repayment).