How are municipal bonds structured?

A municipal bond is categorized based on the source of its interest payments and principal repayments. A bond can be structured in different ways, offering various benefits, risks, and tax treatments. Income generated by a municipal bond may be taxable.

What is an example of a municipal bond?

A municipal bond is a debt security that has been issued by a local government entity. Examples of these issuers are state, county and city governments. Municipal bonds are commonly used to fund the construction of roads, schools, airports, hospitals, wastewater treatment facilities and other infrastructure projects.

How much of my portfolio should be in municipal bonds?

For investors who can benefit from tax-exempt income, a fixed-income-only portfolio should contain a substantial allocation to municipal bonds. We favor 25% or more.

What is in a municipal bond official statement?

An official statement describes the essential terms of the bonds. It typically provides the most detailed description of the terms and features of the bonds through maturity, unless and until these terms have been modified.

What are the two types of municipal bonds?

There are two major types of municipal bonds: “general obligation bonds” and Investor Assistance (800) 732-0330 www.investor.gov Page 2 “revenue bonds.” Because these types come in many varieties, you should look beyond the short-hand label when deciding whether to purchase.

How are muni bonds quoted?

Municipal bonds also may be issued in a minimum denomination of $1,000 to attract local or regional investors. Generally, municipal bond prices are quoted in reference to face or par value of $100/bond, even though the bonds are not traded in $100 increments.

What is the function of a municipal bond?

Municipal securities, or “munis,” are bonds issued by states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for the public good.

At what income level do municipal bonds make sense?

If you sit in the 35% income tax bracket and live in a state with relatively high income tax rates, investing in municipal bonds (munis, for short) will likely be a better option than taxable bonds. Alternatively, if your income is in the 12% tax bracket, you may want to steer clear of municipal bonds.

What is included on a official statement?

What is preliminary official statement?

What is a preliminary official statement (POS)? The POS is an informational disclosure document released prior to the sale that describes the proposed new issue of bonds prior to final determination of the maturity amounts, interest rates and offering prices/yields.

What is the difference between Treasury bonds and municipal bonds?

Basics. The Bureau of the Public Debt, a federal department, issues treasury bonds to provide funds to operate the federal government and to cover the federal debt. Meanwhile, municipal bonds are used to fund local and state public projects, such as roads, schools and other infrastructure.