4.8.4 Arbitrage Yield Restriction Exceptions

As discussed above, the general rule is that proceeds of the bonds may not be invested at a yield that is materially higher than the yield on the bonds. However, there are several important exceptions to this yield restriction rule, and almost all bond issues take advantage of one or more of these exceptions. For example, as a result of the initial temporary period exception, the bona fide DSF exception and the reasonably required reserve or replacement fund exception, none of the proceeds of a typical “new money” governmental financing will be subject, at least initially, to arbitrage yield restriction.