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Municipal Bonds

Municipal The term municipal, or municipality, refers to a local government: a town, city or perhaps local services.

To the securities industry, this is also true. But what is local government, and how local is local? It could get fuzzy. So here is the easy rule of thumb:

A municipality is any form of government other than the Federal government.

States are municipalities as are State agencies, departments, boards, and so on.

Cities and Counties are municipalities, and so are their agencies, departments, boards and so on.

Special operations and districts of States, Cities and Counties such as water and power, school districts, and airports as well as fire protection districts, flood control districts and so on are all considered municipalities on Wall Street.

Bonds In the world of high finance, there are lots of ways to raise money. The best known and most traditional methods are to issue stocks and bonds.

Issuing stock through an initial public offering (IPO) or secondary offerings involves selling off equity stakes and bringing on new ownership who will have a share in any revenue and earnings. Issuing bonds is different and best compared to taking a loan. Instead of sharing ownership and regardless of what earnings are, there is a promise to make fixed interest payments and to pay back the borrowed amount on a fixed date.

A bond is something that binds or connects. On Wall Street, bonds connect borrowers and investors with a promise to pay.

There are many different variations to the structure of bond issues, but here is a very general rule of thumb:
Bonds are a financing method by which money is raised through a promise to repay the face value amount at a fixed maturity date, as well as to pay interest on a fixed payment schedule. Bonds are issued by numerous entities including the United States Treasury, corporations via Corporate Bonds and Municipalities through Municipal Bonds.