Municipal bond

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Municipal bond

State or local governments offer muni bonds or municipals, as they are called, to pay for special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Municipal Bond

A bond issued by a local or state government. Municipal bonds are usually used to raise capital for improvements in infrastructure or other aspects of the municipality. For example, a city or school district may issue a bond to build a new school or a new playground. Municipal bonds are exempt from federal income taxes and sometimes from state and local taxes as well. Municipals usually pay lower coupons than corporate bonds, but because the yield is tax-free, the after-tax basis may be higher for a municipal bond. Risk varies with the municipality and the particular type of municipal bond. It is sometimes called a municipal improvement certificate.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

municipal bond

The debt issue of a city, county, state, or other political entity. Interest paid by most municipal bonds is exempt from federal income taxes and often from state and local taxes as well. The tax exemption stems from the use to which the funds from a bond issue have been devoted. Municipal bonds with tax-exempt interest appeal mainly to investors with significant amounts of other taxable income. Also called muni, municipal, tax-exempt bond. See also Bond Buyer's Index, ex-legal, 501(c)(3) bond, general obligation bond, revenue bond, taxable municipal bond.
Case Study Municipal debt, like corporate debt, ranges in credit quality from investment-grade to very speculative. On November 9, 2001, bond trustee State Street Bank and Trust informed holders of $9.7 million of bonds issued by Marineland Foundation, a nonprofit corporation established by the city of Marineland, Florida, that they would receive $245 for each $1,000 of principal amount. Unfortunately for bondholders the debt was being repaid at slightly less than 25¢ on the dollar. The unrated Marineland bonds had been issued at yields of 8.5% in 1995 to institutional investors and remarketed in 1996 to individuals. Funds raised from the bond issue were used to purchase one of Florida's oldest tourist attractions. Opened south of St. Augustine, Florida, in 1937 as an underwater movie studio, Marineland opened to the public with dolphin and sea lion shows one year later. Attendance suffered beginning in the 1970s following the opening of Disney World, Sea World, Universal Studios, Circus World, and a host of other bigtime Florida attractions. Revenues at the refurbished oceanside aquarium proved too small to cover variable and fixed expenses, including interest on the debt. Marineland had been sold yet again at the time the agreement was reached with bondholders. The new owners intended to promote the attraction as a research resort where visitors could scuba-dive, hike, and learn about marine life.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Municipal bond (muni).

Municipal bonds are debt securities issued by state or local governments or their agencies to finance general governmental activities or special projects.

For example, a state may float a bond to fund the construction of highways or college dormitories.

The interest a muni pays is usually exempt from federal income taxes, and is also exempt from state and local income taxes if you live in the state where it was issued.

However, any capital gains you realize from selling a muni are taxable, and some muni interest may be vulnerable to the alternative minimum tax (AMT).

Munis generally pay interest at a lower rate than similarly rated corporate bonds of the same term. However, they appeal to investors in the highest tax brackets, who may benefit most from the tax-exempt income.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
If municipal bonds are purchased through a unit trust, a "load" (i.e., sales charge) of 3.5% to 5.0% is typically added to the value of the purchase.
The recent volatile investing environment seemed tailor-made for municipal bonds. Their issuers sold a record $160.2 billion of bonds in the first half of 2002 to investors seeking both income and predictability.
With over USD 69 billion in municipal bond assets, JP Morgan's municipal bond investing team offers a broad range of municipal bond solutions across the duration and quality spectrums designed to meet an individual's unique circumstances including risk tolerance, cash flow needs, tax status and investment horizon.
Short-term ratings on enhanced municipal bonds may be lower than those of their liquidity providers, as discussed in Fitch's 'U.S.
Direct-pay subsidy bonds, like Build America Bonds (BABs), are debt securities (e.g., municipal bonds) issued by a state, municipality, or county to finance capital expenditures.
The panelists concluded with a discussion of how municipal bonds fit into a larger fixed income portfolio, and identified both sectors with opportunity and those to avoid.
Still, Patricia Healy, senior vice president of research and portfolio manager at Cumberland Advisors, writes that it's important to choose high-quality municipal bonds now.
In the United States and other mature economies, municipal bonds, also known as "munis," account for a major portion of all bond issuances in their capital markets.
Almost all municipal bonds generate income that is free from federal tax, and an investment in a bond from your state of residence will also be free from state tax.
The Tower Amendment -- enacted in 1975 to amend the Securities Exchange Act of 1934 -- disables the SEC from mandating that issuers of municipal bonds file securities documents before selling the bonds.
In auto care complex shops will be rented to showrooms and workshops by which CDA will earn millions of rupees, while from issued municipal bonds CDA will get Rs 3 billion.

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