Revenue Bond: A type of Municipal Revenue Bond
A revenue bond as its rather apt name would suggest is a type of municipal bond that is specifically guaranteed for repayment through revenues generated solely by an entity or source of revenue directly associated with the purpose of the bond. The revenue stipulated in the legal contract established between the bond holder and issuer is the source of repayment of the principal and interest of the bonds. This comparatively speaking is different from general obligation bonds where a state or local government pledges to use legal sources such as tax revenues to repay bond holders. In addition, the security of the pledge is not as secured as general obligation bonds; however the interest rate of revenue bonds will see higher interest rates.
Simply put, a revenue bond is issued by a locality to financially support a specific public works project. The revenues that this public works project makes are then used to further support the projects existence. Revenue bonds are considered by many to be the second most secure type of municipal bond and are sometimes referred to as municipal revenue bond.