General Obligation Bond (GO)

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Definition of 'General Obligation Bond (GO)'

A general obligation bond (GO) is a type of municipal bond that is backed by the full faith and credit of the issuing government entity. This means that the bondholder is guaranteed repayment of the principal and interest payments, even if the issuing government entity experiences financial difficulties. As a result, GO bonds are considered to be one of the safest investments available.

GO bonds are typically issued by state and local governments to finance a variety of public projects, such as roads, bridges, schools, and hospitals. The interest rates on GO bonds are typically lower than those on other types of bonds, such as corporate bonds, because they are considered to be less risky.

GO bonds are often used by investors who are looking for a safe and secure investment. They are also a popular choice for retirement savings plans, as they provide a steady stream of income that can be used to supplement retirement income.

There are a few things to keep in mind when investing in GO bonds. First, it is important to understand the credit rating of the issuing government entity. The higher the credit rating, the lower the interest rate on the bond. Second, it is important to consider the length of the bond term. Shorter-term bonds are less risky, but they typically offer lower interest rates. Longer-term bonds are riskier, but they typically offer higher interest rates.

Overall, GO bonds are a safe and secure investment that can provide a steady stream of income. However, it is important to do your research before investing in any type of bond.

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