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Definition: Authority Bond
Authority Bonds are a short term bonds issued by government agency or a corporation for the purpose of developing revenue generating public enterprise. These bonds are repaid to the bondholders by the expected revenues from the project. Thus these bonds are similar to Anticipation Notes except for the fact that Authority bondholders have a claim over business revenues & thus margin protection may be incorporated in authority bonds. Thus it provides additional insurance to the bondholder.
Housing Authority Bonds: This is a type of Authority Bonds are used to finance the construction of affordable rental housing plans. Revenue from this housing plan is used to pay the proceeds of the Bond. The interest received by the investors from these bonds is tax exempted.
Housing Authority Bonds were previously viewed as one of the safest investments, however in the last few decades public opinion about the safety of such investments declined due to various municipal financial crisis as well as downgrade in rating of the private companies who were the insurer for such bonds against default.