Municipal Bond

A municipal bond ("muni") is debt issued by a state, city, or local government agency, typically to fund public projects like schools, roads, or utilities. The defining feature is that interest income is usually exempt from federal income tax, and often from state and local tax if you live in the issuing state.

That tax advantage means munis can make sense even at a lower stated yield than a taxable bond, once you compare them on an after-tax basis, which is why they are marketed heavily to investors in high tax brackets.