What is a Municipal Bond?
Municipal bonds, or MUNIs for short, are securities that are distributed by local and state government agencies to help finance public projects like roads, public parks, housing projects and other municipal endeavors. In essence, those who purchase MUNI bonds are essentially buying debt from the issuing agency. MUNIs are, in effect, an IOU that requires the bond issuer to repay the bond in a specific period of time. As a reward for investing in MUNI bonds, the purchaser is entitled to a schedule of interest payments over the period of ownership.