What is an authority bond?

An authority bond is a special type of debt security that is issued by a public authority that manages a public enterprise. The bond is issued to finance the costs of running a revenue-generating publicly-owned business, such as an energy utility. As explained by Investopedia, “Investors buy into authority bonds for a stated period, which allows the financed project to be completed and begin earning revenue; after this period, the bond will pay interest at a specified rate. Buyers of authority bonds have a claim to the business’s revenue, which serves as the bond’s yield. (Yield refers to the earnings generated and realized on an investment over a particular period of time.)”