Content
- What Are Municipal Bonds?
- An Investment For Today's Tax-conscious Investor
- The Advantages of Tax Exemption
- Understanding Yields
- How Safe Are Municipal Bonds?
- Understanding Market Risk
- Understanding Calls
- Gains and Losses
- Bonds With Special Investment Features
- Types of Tax-exempt Municipal Bonds
- Taxable Municipal Bonds
- Other Basic Facts
- The Tax-exempt Municipal Bond Market--How Big and Who Buys?
- Tax-exempt/Taxable Yield Equivalents
- State Taxation of Municipal Bonds for Individuals
- Glossary
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All information and opinions contained in this publication were produced by The Bond Market Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, The Bond Market Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.
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Bonds With Special Investment Features
Insured municipal bonds. Many municipal bonds are backed by municipal bond insurance specifically designed to reduce investment risk. In the unlikely event of default, an insurance company which guarantees payment will send you both interest and principal when they are due.
Floating-rate and variable-rate bonds. These securities are attractive in a rising-interest-rate environment. Generally, interest is periodically recalculated based upon a percentage of prevailing rates for Treasury bills or other interest rates.
Zero-coupon, compound-interest and multiplier bonds are issued at a deep discount of the maturity value and have no periodic interest payments. You receive one lump payment at maturity equal to principal invested, plus interest compounded semiannually at the original interest rate. Because they do not pay interest until maturity, their prices tend to be volatile. These bonds are especially attractive if you seek to accumulate capital for a long-term financial goal such as retirement planning or college costs.
Put bonds. Some bonds have a “put” feature which allows you to redeem the bond at par value on a specified date long before its maturity date. If interest rates increase, you can cash in the bonds at any put date, recoup the principal and purchase higher-yielding bonds.
