General Obligation Bond Definition

Definition

A general obligation bond is a municipal bond backed by the issuer's full faith, credit, and taxing power, commonly including ad valorem property taxes.

Why it matters on the Series 7

The exam tests whether you can identify the backing source. GO bond questions use clues such as voter approval, property taxes, debt limits, and the municipality's general credit strength.

Example

A town issues bonds to build a public school and pledges its taxing authority to repay investors. That is a general obligation structure.

Common mistakes

• Treating GO and revenue bonds as interchangeable because both are municipal.
• Missing property-tax or full-faith-and-credit language in the stem.
• Assuming a project automatically means revenue-bond backing.