Investing Basics

What Is a Municipal Bond?

A municipal bond, or muni, is a debt security issued by a US state, city, county, or other local government to fund public projects such as schools, roads, and utilities. Interest from many municipal bonds is exempt from federal income tax, and sometimes from state tax for residents of the issuing state.

Taxable-Equivalent Yield

Taxable-equivalent yield = municipal yield ÷ (1 − tax rate). A 3% muni yield equals about 4.2% taxable yield for someone in a 28% bracket.

Types

General obligation bonds are backed by taxing power; revenue bonds by income from a specific project.

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🔗 Related Terms

Bond Treasury Bond Marginal Tax Rate Yield to Maturity (YTM)

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.