Abstract
The behavior of the yield differential between general obligation bonds and revenue bonds is studied with respect to the business cycle. A residual analysis technique is employed whereby it was determined that no relative advantage accrues to either revenue bonds or general obligation bonds as a result of general business conditions. While the yields of both bonds are very much influenced by cyclical economic swings, the influence is indistinguishable as to its ejects on revenue bonds and general obligation bonds. The implications of the findings are briefly discussed.
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