Bob's Daily Buzzword: `G.O. Bonds'

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July 24 (Bloomberg) -- Bob Rice, general managing partner with Tangent Capital Partners LLC, explains "G.O. Bonds." (Source: Bloomberg)

A federal judge sending headlines out of detroit bankruptcy.

That is valid and very much in play.

To the great distress of investors out there.

The term general obligation means that the municipality that issues these bonds is supposed to use its full power to make sure it has the interest and principal to pay back investors.

Of course, the big distinction is against jeep -- revenue bonds.

There are some other kinds of certificates of participation.

The big idea is that it is normally associated with specific hospitals and stadiums and you only get the revenues out of that project to pay back your bond.

Getting back to it, i know we have charts about how much these have suffered lately.

I know that when we talk about detroit, people say that people will only be paid 10 cents on the dollar.

It is a big shocker.

This shows how much the high- yield municipal bonds have been hurt over the course of the last year.

It shows you how they have been doing better than high-yield municipals.

Our friend from cumberland advisers, very exciting, showing the aaa general obligation bonds are using more than taxable u.s. treasuries at this point.

That is incredibly unusual.

It shows you how much damage has been done by detroit, primarily.

You see that this is supposed to be a safe investment?

That is right.

What we have gotten out is that everyone has realized it is not quite as safe as people thought.

Back in two minutes.

This text has been automatically generated. It may not be 100% accurate.


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