What secures a revenue bond?

A revenue bond is secured by a specific source of financing rather than the general credit of the issuing government. This means that the revenue generated from a particular project or service, such as tolls from a toll road or fees from a public utility, is used to pay the interest and principal on the bond. Lenders are thus assured that the repayment will come from this dedicated revenue stream.

This distinction is important because it indicates that the bond is inherently linked to the performance of the specific project it finances. If the project does not generate expected revenues, it may affect the ability to repay the bondholders, but it does not involve the general government funds as seen with general obligation bonds, which are backed by the full faith and credit of the issuing authority.