Municipal Bond
InvestingGlossary term
Definition
A bond issued by a state, city, or county to fund public projects like schools, roads, and hospitals. Interest income is typically exempt from federal taxes and often from state taxes if you live in the issuing state, making them attractive to high-income investors.
Related terms
- BondA fixed-income investment where an investor loans money to an entity (government or corporation) that borrows the funds for a defined period at a fixed interest rate.
- Tax-Exempt InvestmentAn investment whose earnings are not subject to federal or state income tax. Municipal bonds are the most common example, as their interest income is generally exempt from federal taxes and often from state taxes if you live in the issuing state.
- Corporate BondA debt security issued by a corporation to raise capital, paying regular interest to bondholders. Corporate bonds offer higher yields than government bonds but carry more risk. Credit ratings from agencies like Moody's and S&P indicate default risk.
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