Bonds
Municipal Bonds
Loans to states, cities, school districts and public authorities. The interest is generally exempt from federal income tax, which is why a muni's headline yield is lower than a taxable bond's and can still be worth more after tax.
Data as of Aug 21, 2026.
A municipal bond is a loan to a government below the federal level, or to an authority it created. Two families cover most of the market. A general obligation bond is backed by the issuer's taxing power. A revenue bond is backed only by the money a specific asset generates — a water system, a toll road, an airport, a hospital.
That distinction is the whole credit analysis in miniature. A GO bond fails if a community's tax base fails. A revenue bond fails if one project's revenue fails, and nothing else stands behind it.
The federal tax exemption is what makes the asset distinctive. It also means the headline yield is the wrong number to compare against a taxable bond — you have to gross it up to a taxable-equivalent yield first.
You lend to a city or state and, in most cases, the IRS does not tax the interest. That is why the quoted rate looks low: the comparison you care about is what a taxable bond would have to pay you before tax to leave you with the same amount.
At a glance
Issuer, backing, term and how the cash actually reaches you.
Who issues them
States, counties, cities, school districts, and special authorities for water, power, transport, housing and healthcare. Conduit issues let a private borrower use a public issuer's name, in which case the private borrower is the real credit.
What backs them
General obligation bonds are backed by the issuer's taxing power, sometimes with an unlimited-tax pledge, sometimes capped. Revenue bonds are backed solely by the pledged revenue stream and its rate covenants — not by taxes and not by the general fund.
Typical maturities
Deals are sold as serial maturities running roughly 1 to 20 years plus term bonds out to 30. A ten-year par call is a common feature, so a 30-year bond frequently behaves like a 10-year one.
How you get paid
Semi-annual coupons and par at maturity or at the call date. Minimum denominations are typically $5,000, which is why individual munis are bought in blocks and funds dominate small accounts.
What it pays right now
Live series from our rates table, each labelled with what it measures, who published it and when. Index and benchmark levels, not the price of a specific bond.
In text, the series shown below currently read: 10-year Treasury at 4.74%; Investment-grade corporate bonds at 5.43%. These rows are quoted on more than one basis, so they are listed rather than ranked — the Basis column says which convention each one uses. Each row carries the basis it is quoted on and the exact series that supplies it.
Three things to know before you read a number in this table. Each row is a published series, not a bond for sale — several of these are averages across hundreds of bonds, and an average is not a price anyone will fill you at. The Basis column says what each row measures, and rows measured differently are not comparable with one another however close the numbers look. And the Observed column dates the reading: NOT CURRENT means the publisher is overdue and the figure shown is the last one they released, not today's. The note under the table says which rows belong to this category and which are here only as a benchmark to measure it against.
| Series | LatestThe most recent published reading. Percent per year, unless the basis says points. | Change | BasisWhat the number measures. Two rows on different bases cannot be compared. | Provider · series | Observed |
|---|---|---|---|---|---|
| 10-year Treasury | 4.74% | +0.05 pts | Constant-maturity yield | US Treasury via FRED · DGS10 | Aug 21, 2026 |
| Investment-grade corporate bonds | 5.43% | +0.02 pts | Index effective yield | ICE BofA index via FRED · BAMLC0A0CMEY | Aug 21, 2026 |
We do not currently carry a municipal index yield, so nothing here is a muni rate — these are the two taxable benchmarks a muni yield is measured against: the 10-year constant-maturity Treasury yield (US Treasury via FRED) and the ICE BofA investment-grade corporate index effective yield (via FRED). Both are taxable figures. Use the calculator below to gross a tax-free yield up to its taxable equivalent before comparing it with either of them.
How the income is taxed
US federal and state treatment. Rules change; this is the structure, not tax advice.
Why this section sits between the rates and the risks rather than at the end: two bonds quoting the same number do not pay you the same amount. Bond interest is generally taxed as ordinary income federally, at your own marginal rate, and what differs between the families is whether your state also taxes it and whether any federal exemption applies. A headline yield is a before-tax figure everywhere on this site, so the comparison that matters to you is the one made after the paragraphs below.
Federal exemption is the headline, but it is not universal. Private-activity bonds can be a preference item for the alternative minimum tax, and a whole category of taxable munis exists — Build America Bonds and, since the 2017 rules ended tax-exempt advance refunding, taxable refunding issues.
In-state bonds are commonly exempt from that state's income tax as well, which is where the phrase double tax-exempt comes from. Out-of-state bonds are usually taxable by your state even though the federal exemption still applies.
Selling a muni for more than you paid produces a taxable capital gain. If you bought at a market discount beyond the de minimis threshold, the accretion back to par is ordinary income, not tax-free interest.
Tax-exempt interest is still reported and still counts in the formula that determines how much of your Social Security benefit is taxable, so it is not invisible to the rest of your return.
What the box below is for. A tax-free yield and a taxable yield are not the same number even when they look like one, because you keep all of the first and only part of the second. Grossing up converts the tax-free figure into the taxable yield that would leave you with the same money, which is the only form in which the two can be set side by side. Put your own marginal rate in — the answer changes with it, and at a low rate the gross-up is small.
Taxable-equivalent yield
A tax-free yield is not comparable to a taxable one until you gross it up. The simple form is tax-free yield divided by one minus your combined marginal rate. Change the inputs below — the arithmetic runs in your browser and nothing is stored.
Use 0 unless the bond is exempt in your own state.
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Illustrative arithmetic on the figures you enter — not a market rate and not a quote.
This is the simple combined-rate form. It ignores the interaction with the state and local tax deduction, the alternative minimum tax on private-activity bonds, and the effect of tax-exempt interest on the taxable share of Social Security benefits. The fuller version lives on the taxable-equivalent-yield calculator, and the concept is explained at taxable-equivalent yield.
Funds that hold these
Exchange-traded funds in our universe tagged to this category, sorted by trailing 12-month distribution yield.
7 funds tagged to this category are listed below. Trailing twelve-month distribution yields run from 2.55% on SUB to 4.38% on HYD, with a median of 3.42% across the 7 funds that have paid a distribution in the past year. 7 of them pay monthly rather than quarterly. Every figure in that column is trailing cash already paid over the last 365 days divided by the latest price — a distribution yield, not a forward yield, not a yield to maturity and not an SEC 30-day yield.
A fund is how most people end up owning this category, and it is not the same instrument as the bonds inside it. The yield column here counts the cash already paid out over the last year against today's share price, so it describes what has happened rather than what the holdings are contracted to earn — the two can differ by a wide margin in either direction. The other difference is the one people notice late: an individual bond has a date on which it repays, and a fund does not. It keeps selling and rebuying, so there is no maturity to wait for if the price falls.
| Ticker | Fund | HoldsThe kind of bonds the fund lends through. | Price | Distribution yield, trailing 12mCash the fund has already paid out over the past year, divided by today's price. | Cash paid / share, trailing 12m | Pays |
|---|---|---|---|---|---|---|
| HYD | VanEck High Yield Muni ETF | Municipal | $50.42 | 4.38% | $2.21 | Monthly |
| PZA | Invesco National AMT-Free Municipal Bond ETF | Municipal | $22.78 | 3.82% | $0.87 | Monthly |
| TFI | State Street SPDR Nuveen ICE Municipal Bond ETF | Municipal | $44.87 | 3.58% | $1.61 | Monthly |
| VTEB | Vanguard Tax-Exempt Bond ETF | Municipal | $49.58 | 3.42% | $1.70 | Monthly |
| MUB | iShares National Muni Bond ETF | Municipal | $105.58 | 3.23% | $3.41 | Monthly |
| SHM | State Street SPDR Nuveen ICE Short Term Municipal Bond ETF | Municipal | $47.78 | 2.68% | $1.28 | Monthly |
| SUB | iShares Short-Term National Muni Bond ETF | Municipal | $106.36 | 2.55% | $2.71 | Monthly |
How it loses money
The specific failure modes for this category, not a generic warning.
Most people arrive at bonds expecting the only question to be whether the borrower pays. The list below is the answer to a different question: the ways the money shrinks while every payment arrives exactly on schedule. Prices fall when new bonds pay more than yours, inflation can outrun a fixed payment, and a borrower who repays early hands the cash back at the worst moment to reinvest it. Read these before the yield, not after it.
- Call riskMunis are called more often than almost anything else in the bond market. The standard ten-year par call means a falling-rate environment quietly ends your best holdings and hands the cash back.
- LiquidityThere are over a million distinct municipal CUSIPs, most of them tiny. An individual bond may trade a handful of times in its life, dealer mark-ups are embedded in the price rather than billed, and selling a small odd lot is where the cost shows up.
- Credit riskMunicipal defaults are uncommon but they are not theoretical — Detroit and Puerto Rico both restructured. Revenue bonds tied to a single hospital, stadium or speculative development carry far more credit risk than a state GO.
- Interest-rate riskSame mechanic as every other bond: yields up, prices down, more so the longer the maturity. The call feature makes this asymmetric — the bond extends when rates rise and gets called when they fall.
- The exemption can be worth littleIn a low marginal bracket, or inside an IRA or 401(k), the tax exemption you paid for in the form of a lower yield delivers nothing. That is arithmetic, not opinion — run it before comparing.
- Single-state concentrationA state-specific fund maximises the tax benefit and concentrates the credit and economic risk in one place at the same time.
Where these are traded
The Treasury's direct issuance channel for notes, bonds and TIPS, including non-competitive bids at auction without a broker.
Holdings there cannot be sold before maturity without transferring them to a broker first
Visit TreasuryDirect ↗The Municipal Securities Rulemaking Board's official disclosure site, carrying offering documents, reported trade prices and continuing disclosures for municipal bonds.
Free official source; no account needed
Visit MSRB EMMA ↗The broker-dealer regulator that runs the TRACE trade-reporting system for corporate, agency and municipal bond transactions and publishes market data from it.
Also hosts BrokerCheck for looking up a firm or registered rep
Visit FINRA ↗Runs a retail bond desk with new-issue and secondary inventory across Treasuries, municipals, corporates, agencies and brokered CDs.
Individual bond pricing is quoted net of a dealer markup rather than as a separate commission
Visit Fidelity Investments ↗Listed for reference. No sponsorship badge means no affiliate relationship exists.