Closed-end funds hold 4 percent, totaling $89 billion municipal bond UITs hold $8 billion and ETFs that track municipal bond indices hold $575 million in assets. municipal securities, totaling over $809 billion. Mutual funds alone account for 32 percent of all U.S. According to ICI’s most recent data, investment companies of all types hold $907 billion, or 36 percent, of the $2.5 trillion municipal bond market.

They hold 35 percent of municipal bonds directly and another 36 percent indirectly through mutual funds, closed-end funds, UITs, and ETFs. Individual, or “retail,” investors are the largest holders of municipal securities. Securities and Exchange Commission (SEC).

Securities dealers that trade municipal securities must register with the Municipal Securities Rulemaking Board (MSRB), which sets the rules for the municipal bond market subject to the oversight of the U.S. However, many investors buy and hold their bonds until they mature, so certain municipal bonds may not trade for months or years at a time. Some bonds are “actively traded,” meaning that they are traded on a regular basis. Instead, it is an over-the-counter market-a network of dealers and brokers that connect buyers and sellers. The municipal, or “muni,” market does not operate via a centralized exchange. These low yields allow state and local governments to borrow money for public projects at below market rates. Municipal bonds, therefore, also are known as tax-exempt bonds.īecause they offer tax-free income, municipal bonds generally have annual yields below those of corporate bonds or U.S. The interest may also be exempt from state and local taxes if the investor lives in the state where the bond is issued. When you purchase a municipal bond, you lend money to the 'issuer' (i.e., the government entity that issued the bond), which, in turn, pays a set amount of interest while you hold the bond and returns your principal investment on a specified maturity date.Ī primary feature of many municipal bonds is that the interest income an investor receives is generally exempt from federal income tax. Municipal bonds (“muni bonds”) are debt securities issued by state and local governments, or their authorized agencies, to borrow or raise money for public purposes such as building schools, highways, or hospitals.

Frequently Asked Questions About Municipal Bonds What are municipal bonds?

Municiple bond defaults