Municipal Securities

Municipal Bond Types

• General obligation bonds are backed by the taxing power of the issuer and are typically approved by voters. Revenue bonds are backed by revenues from a specific project or facility and are evaluated by feasibility and debt-service coverage.
• Municipal notes include TANs, RANs, BANs, and TRANs for short-term financing. Variable-rate demand obligations may include put features and bank support.

Tax Treatment and Structure

• Interest on most municipal bonds is exempt from federal income tax, though capital gains are taxable. Some issues may be subject to the alternative minimum tax.
• Muni prices are often compared using tax-equivalent yield: municipal yield / (1 - tax bracket). This helps evaluate whether a taxable bond or municipal bond offers the better after-tax return.
• Serial bonds mature in staggered years; term bonds mature in one year and often use sinking funds.

Underwriting and Disclosure

• The official statement is the disclosure document for a new municipal offering. The MSRB writes rules, but it does not enforce them. EMMA provides public access to official statements, continuing disclosures, and trade data.
• In the secondary market, confirmations disclose whether a bond is callable, insured, and subject to original issue discount or premium considerations.

Series 7 focus

• Expect distinctions between GO and revenue bonds, tax-equivalent yield calculations, and suitability questions for high-bracket investors seeking tax-free income.