Municipal Bond
Also called: muni bond, munis, tax-exempt bond
A municipal bond is debt issued by a state, city or local authority, and in the US its interest is generally exempt from federal income tax. That exemption is the entire pricing story: munis yield less than taxable bonds, so comparing them requires a tax-equivalent yield. For a high-bracket investor a 3.5% muni can beat a 4.6% corporate. Credit quality ranges from near-Treasury general obligation debt to revenue bonds backed by a single project's cash flows.