Which type of bonds enhances credit quality by securing both the revenue of the facility and a general obligation pledge?

Double barrel bonds enhance credit quality by combining two forms of security: they are backed by both the revenue generated from a specific facility and a general obligation pledge from the issuing municipality. This dual security mechanism adds a layer of assurance for investors, as it provides two potential sources of repayment. If the revenue from the facility is insufficient to meet debt obligations, the general obligation pledge serves as an additional guarantee, which typically reflects the issuer's broader financial strength and creditworthiness.

This characteristic makes double barrel bonds particularly attractive to investors, leading to improved credit quality compared to bonds reliant solely on one type of revenue stream. Consequently, municipalities often issue these bonds when they want to instill greater confidence in their debt and potentially secure lower interest rates.

In contrast, general obligation bonds are solely backed by the taxing power and credit of the issuing entity, while revenue bonds depend exclusively on the revenue generated from a specific project or facility. Tax-exempt bonds refer to the tax treatment of the bond's interest income rather than its credit quality or backing.