Municipal bond - Financial definition
Country
: United States of America
Concise definition of the term municipal bond
A municipal bond is a debt security issued by a local government or its agencies to finance public projects, with interest payments typically exempt from federal income tax.
Comprehensive definition of the term municipal bond
Municipal bonds, often referred to as "munis," play a critical role in funding infrastructure projects such as schools, roads, hospitals, and utilities at the state and local levels. These bonds are attractive to investors seeking tax-exempt income, as interest earned on municipal bonds is typically exempt from federal income tax and may also be exempt from state and local taxes for investors residing in the issuing municipality.
Municipal bonds come in various forms, including general obligation bonds, which are backed by the full faith and credit of the issuer, and revenue bonds, which are secured by the revenues generated by the specific project being financed. The municipal bond market is vast and diverse, encompassing bonds issued by states, cities, counties, school districts, and other municipal entities, offering investors a wide range of investment options with varying levels of risk and return potential.