Municipal Bonds

Municipal Bonds Definition

Municipal bonds are debt securities that  cities, counties, states, authorities and other governmental entities issue to raise funds for all sorts of public purposes—such as building bridges, schools, highways, hospitals, sewer systems, parks, and other special public works projects. A primary feature of many municipal securities is that the interest investors receive is generally exempt from federal income tax. The interest might also be exempt from local and state taxation if you live in the state where the bond is issued.

When investors purchase a municipal bond, they lend money to the "issuer," the government entity that issued the bond. In exchange, the government entity promises to pay back investors a specified amount of interest, usually on a semiannual basis, and return their money, also known as "principal," on a specified maturity date.


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Municipal Bonds


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