Municipal Bonds

Abstract This chapter discusses various types of municipal bonds, which represent an important part of the bond market. After providing a brief history of municipal bonds, the chapter then discusses two major types of municipal bonds: general obligation and revenue bonds. The next topics focus on tax exemption, credit considerations, and municipal bond structuring alternatives such as fixed, variable, and serial debt. Next, the chapter discusses the municipal bond value proposition resulting from comparatively low rates of default coupled with relatively high investment returns on a taxable equivalent basis. The chapter also highlights several “hot button” issues facing the municipal bond market such as pension bonds, private-public partnerships, and types of bond sales.