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A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, but not always, exempt from federal and state income taxation.
An auction rate security (ARS) typically refers to a debt instrument (corporate or municipal bonds) with a long-term nominal maturity for which the interest rate is regularly reset through a Dutch auction. Since February 2008, most such auctions have failed, and the auction market has been largely frozen.
Municipal bond taxes. Municipal bonds issued by local or state governments generally offer interest income that is exempt from federal taxes. Moreover, if you live in the state where the bond is ...
There are several ways to invest in municipal bonds, but the most common include purchasing individual municipal bonds, buying muni mutual funds or exchange-traded funds (ETFs) and creating ...
The MSRB was created by the Section 15B of the Securities Exchange Act of 1934 (as amended by the Securities Acts Amendments of 1975, Pub. L. 94–29, and codified at 15 U.S.C. § 78o-4(b)) to create a mechanism for the regulation of municipal securities as well as brokers, dealers, and banks in the municipal securities business.
In many cases, it could make sense to go with a lower-yielding tax-free bond than a high-yielding traditional bond, because the after-tax yield on the muni bond is ultimately higher.
In effect it is a type of option on the maturity date where the bond can be converted to shares or cash. For the investor they get the advantage of a steady stream of income due to the payment of a high coupon rate , but will either get back their principle ( par value ) or a predetermined number of shares in the underlying stock if they are lower.
Here’s a look at the primary risks associated with municipal bonds: Interest Rate Risk. Interest rate risk is one of the key threats to municipal bond investors.. When interest rates rise, the ...