Which type of bonds are backed by the full faith and credit of local governments?

General Obligation Bonds are indeed backed by the full faith and credit of local governments. This means that these bonds are secured by the issuer’s promise to use its taxing power to repay the debt. Local governments issue these bonds to finance public projects such as schools, parks, and infrastructure, and they are typically funded through property taxes or other sources of revenue that the government has access to.

The concept of "full faith and credit" signifies that the government is obligated to honor its debt obligations, which adds a layer of security for investors. This security often results in lower interest rates for General Obligation Bonds compared to other types of bonds, as investors perceive them as lower risk due to their backing by the local government’s ability to raise taxes if necessary.

In contrast, Revenue Bonds are not backed by the government's overall credit but rather by specific revenue sources, such as tolls from a bridge or fees from a utility service. State Bonds, while issued by state governments, do not necessarily carry the same implications as General Obligation Bonds of local governments. Infrastructure Bonds could broadly refer to various bonds issued for infrastructure projects but are not specifically tied to the full faith and credit of local governments. Thus, General Obligation Bonds uniquely fulfill this characteristic among the options provided