Fixed Income · Core
Municipal Bond
A municipal bond is debt of a US state, city, or related authority — often tax-exempt, with credit that is not a Treasury.
Definition
GO bonds pledge taxing power; revenue bonds pledge a project. Interest is often federal-tax-exempt (and sometimes state). Credit is appropriations, demographics, and the project, plus the occasional political surprise.
Why it matters
Tax-equivalent yield is the quote for taxable accounts. Supply, refundings, and the tax law move the market more than a single payroll print.
Case
Puerto Rico and Detroit taught that ‘muni’ is not a synonym for safe. Tax exemption does not pay principal.
How to read it
TEY = tax-exempt yield / (1 − tax rate). Then read GO vs revenue, and whether the exemption still applies to you.
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