Municipal bonds

Definition

Municipal bonds are debt securities issued by municipalities, states, cities, or counties to finance public projects like schools, highways, and water treatment facilities. They offer investors tax-free interest income at the federal level and potentially at the state and local levels if the investor resides in the issuing municipality.

Related terms

Debt Securities: Financial instruments that represent a loan made by an investor to a borrower, typically entailing fixed periodic interest payments and the return of principal at maturity.

Tax: exempt Interest - The income received from certain bonds or investments that is not subject to federal income taxes, and in some cases, state and local taxes.

Public Projects: Initiatives undertaken by a government body intended to serve the public by improving infrastructure, educational facilities, transportation systems, etc., often funded through various means including issuing municipal bonds