What is a key characteristic of conduit bonds?

A key characteristic of conduit bonds is their purpose in financing projects for third parties. Conduit bonds, also known as conduit revenue bonds, are issued by a governmental entity but are typically utilized to finance projects for private organizations or non-profits. The government acts as a conduit to facilitate the funding, allowing the private sector entities to access capital markets for projects such as schools, hospitals, or infrastructure developments.

The bonds are secured by the revenues generated from the projects they finance, meaning that the third party is responsible for repayment rather than the government issuer. This structure highlights how conduit bonds serve as a mechanism to support private initiatives without placing the debt burden on the government itself. This arrangement distinguishes conduit bonds from traditional governmental bonds aimed at directly funding public projects that are expected to generate profit or revenue for the issuing body.