What are Municipal Bonds?

Thus, bonds with higher coupon rates provide a margin of safety against rising market interest rates. If the market rate turns lower than a bond's coupon rate, holding the bond is advantageous, as other investors may want to pay more than the face value for the bond's comparably higher coupon rate. When investors buy a bond initially at face value and then hold the bond to maturity, the interest they earn on the bond is based on the coupon rate set forth at the issuance. For investors acquiring the bond on the secondary market, depending on the prices they pay, the return they earn from the bond's interest payments may be higher or lower than the bond's coupon rate.

This is the effective return called yield to maturity. For related reading, see " Yield to Maturity vs.

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Coupon Rate: What's the Difference? Fixed Income Essentials. Corporate Bonds. Investopedia uses cookies to provide you with a great user experience. By using Investopedia, you accept our. Your Money.

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Popular Courses. In all of these cases, the bond issuer promises to pay you interest on your money.

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At some point in the future, on the maturity date, you are promised the return of the par value of the bond itself. In most cases, certainly in the case of a traditional tax-free municipal bond, this is equal to the amount of money you originally lent the issuer. For many investors, knowing this simple fact—that you are going to get your money back at a specific point in the future as long as the bond issuer doesn't default—makes holding tax-free municipal bonds easier psychologically and emotionally.

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Are muni bonds still a safe investment bet?

By using The Balance, you accept our. Investing for Beginners Bonds. By Joshua Kennon. Continue Reading. Consider consulting a tax professional to discuss the bond's tax implications, including the possibility that your bond may be subject to the federal alternative minimum tax or eligible for state income tax benefits.

Coupon Rate

Broker compensation. Most brokers are compensated through a markup over the cost of the bond to the firm. This markup is usually not disclosed on your confirmation statement.

Coupon Rate and Yield to Maturity

If a commission is charged, it will be reported on your confirmation statement. You should ask your broker about markups and commissions.

What is a municipal bond?

The background of the broker or adviser selling the bond. These organizations may charge a fee. Municipal Bonds.

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What are municipal bonds? Where can investors find information about municipal bonds?

  • Are muni bonds still a safe investment bet?.
  • VanEck Rest of World | VanEck!
  • The Best Municipal Bonds for this Year.
  • How do Municipal Bonds Work? Learn the Basics.
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  • Investors should be aware that recent price information may not be available for bonds that do not trade frequently. Investors in municipal bonds face a number of risks, specifically including: Call risk.