Lesson 5 of 5 · 13 min
Agencies, local governments and supranationals
Public issuers below or beyond the national government fund themselves from local taxes, user fees, project revenue or member-state support, and the stability of those repayment sources decides how cheaply and at which maturities they can borrow.
In short
- Non-sovereign public funding varies by country, depending on whether services are run at national, regional or local level.
- Some non-sovereigns can levy taxes; others rely on budget allocations or user fees, sometimes with sovereign or local support as a secondary repayment source. Predictable, stable repayment sources mean better access across maturities.
- Agencies (quasi-government entities) borrow to provide a specific public service set by law, matching debt maturities and structures to their activities. They borrow at yields near the sovereign's but without the full liquidity premium.
- Local governments: general obligation (GO) bonds are unsecured and repaid from taxes; revenue bonds fund specific projects, are repaid from project revenue, and are usually long-dated to match the project's life.
- Supranationals are owned by several sovereigns, have the highest credit quality among these issuers, borrow in major currencies in global markets, and can partner with sovereigns to create agencies that borrow more cheaply than an EM sovereign.
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