Issue Brief Looks at Pension Obligation Bonds

Friday, July 11, 2014

A new issue brief from the Center for State and Local Government Excellence examines the rationale for issuing Pension Obligation Bonds and how they have performed since the financial crisis. An Update on Pension Obligation Bonds finds that governments are more likely to issue POBs if their debt levels are high, they are short of cash, and the pension plan represents a substantial obligation to government. If the timing is good, governments will earn more on the proceeds than they have to pay in interest, although POBs had a negative average real return from 1992-2009.