Great question, I'm no expert in those, I wrote this as a thought experiment.

If I had to guess, I might speculate that having an auction mechanic could allow the bonds to be sold at a more competitive price, and being on-chain fungible might create a more liquid market, again, mostly about helping price reflect willingness to invest, competitively.

Maybe bonds could be structured that way too, I mean since y requires the city to back it with water, it really is just a city loan, I'd be curious to see why municipal bonds haven't already been deployed here, maybe lack of city credit?