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DEFINITION of 'Municipal Bond Fund'

A mutual fund that invests in municipal bonds, or "munis." Municipal bonds are debt securities issued by a state, municipality, county, or special purpose district (public schools, airports, etc.) to finance capital expenditures. They are exempt from federal tax, and are generally exempt from state taxes for residents of the state in which they are issued.

BREAKING DOWN 'Municipal Bond Fund'

Municipal bonds and bond funds are generally bought for their favorable tax implications and are a popular fixed-income investment for people in a high income tax bracket. Like all bonds, the municipal variety is subject to an investor's consideration of yield, credit quality and duration.

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RELATED FAQS
  1. How are municipal bonds taxed?

    Discover information about trading municipal bonds, specifically the various tax implications municipal bonds have at state ... Read Answer >>
  2. What is the difference between municipal bonds and standard money market funds?

    The primary difference between municipal bonds - also known as "munis" - and money market funds is that municipal bonds are ... Read Answer >>
  3. What do cities do with the funds generated from municipal bonds?

    Learn more about municipal bonds, including the various types of bonds issued and the purposes of municipal bond funds, such ... Read Answer >>
  4. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  5. How can you use a debt service coverage ratio (DSCR) to evaluate municipal bonds?

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