Introduction
Municipal bonds, often called "munis," are a type of debt security issued by state and local governments. When you buy a municipal bond, you're essentially loaning money to the issuer in exchange for regular interest payments and the return of your principal investment on a predetermined maturity date. One of the critical factors to consider when evaluating municipal bonds as an investment option is the interest rate they offer.
Municipal bond interest rates are influenced by a multitude of factors, including prevailing market interest rates, the creditworthiness of the issuer, and the maturity date of the bond. Generally, bonds with longer maturities carry higher interest rates to compensate investors for the extended risk of holding the investment. Conversely, bonds with shorter maturities tend to offer lower interest rates due to the reduced risk involved.
