General Obligation Bonds

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Definition: General Obligation Bonds

General obligation bonds are instruments that are issued by governments to raise capital for projects of public works like roads, bridges, parks, etc. Such projects do not generate any revenue and hence the issuing authority has the right to legally use all available resources like property tax revenues and funds raised through credit, to repay its bondholders.

There are two types of General obligation bonds (GOB), namely limited GOB and unlimited GOB. In a limited GOB, the government can levy a property tax only up to statutory limit to meets its debt requirements. In an unlimited GOB, the government is required to levy a tax rate that is necessary to meet the complete debt requirements over the life of the bonds.

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