Municipal bonds are issued by states, counties, cities and towns all across America to fund
local projects such as roads, sewers, school construction, bridges, toll roads, and hospitals.
The interest earned on these fixed income investments is generally free from federal income taxes
and, in some cases, from state and local income taxes as well, all depending on an individual
investor's situation.
Usually issued by major corporations, these corporate debt instruments pay interest that is generally
taxable at all three levels: federal, state and local.
These are negotiable debt obligations that include notes, bonds, and bills issued by the U.S.
government at various schedules and maturities. Treasuries are backed by the full faith and credit
of the U.S. government.
These are a unique class of bonds, issued with a steep original discount and paying NO regular
coupon interest, but maturing at full face value of $1000 after a period of years.
(Think of buying a dollar in ten years while only paying pennies for that dollar today.)
In addition to the U.S. Treasury bonds and municipalities bonds, federal government
agencies issue bonds in their own names to raise capital. These securities are issued
by agencies related to the federal government or that are owned privately but
publicly chartered. The capital they raise helps pay for projects such as home loans,
student loans, small business development and farming.