Self Supporting Bond
Self Supporting Bond is a bond issued by municipalities in order to finance a project. Interests and principals on self-supporting bond will be paid trough project revenues. Municipalities usually issue this kind of bonds in order to finance projects from which they can collect money from the users of the project, such as roads, railroads, or airports.
These bonds tend to carry higher yields than general obligation bonds issued by municipalities. General obligation bonds are secured by general tax revenues, and are less risky therefore. However, self-supporting bonds are considered low risk because of viable projects behind them.
Like in the case of all municipal bonds, interests on these bonds are exempt from federal tax. If the holder of the bonds is a resident of the state that issued the bonds, interest rates are also exempt from state tax. And if the holder of self supporting bond is a resident of the locality that issued the bond, interest payments are also exempt from local tax.
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