Which type of bonds are secured by the full faith and credit of a governmental unit?

General obligation bonds are secured by the full faith and credit of a governmental unit, which means that the government commits to using its tax revenues to pay back the bondholders. This type of bond is typically issued to fund public projects, such as infrastructure developments, and provides investors with a higher degree of security compared to other types of bonds because they are backed by the issuing municipality’s ability to levy taxes.

The full faith and credit assurance indicates that the issuer is obligated to ensure that the bondholders are repaid, making general obligation bonds a less risky investment. This is particularly appealing to conservative investors seeking stable returns. Other types of bonds, such as revenue bonds, rely on the revenue generated from specific projects for repayment, which does not provide the same level of security afforded by general obligation bonds.