Funds generated by these bonds are used to finance construction or repair of highways, hospitals, schools or other public facilities. Interest earned from municipal bonds is exempt from federal income taxes and from state and local income taxes in the state in which they were issued. Municipal bonds will typically carry a lower interest rate than other bonds, but investors in higher income tax brackets may still find the municipals attractive. Opportunities to buy and sell some municipal bonds are restricted if few bonds were sold for a small project in a limited geographic area. Consider buying well-known issues of larger state and local governments if you anticipate selling the bonds prior to maturity.
Corporate bonds are debt obligations of corporations.
Quality of corporate bonds varies greatly. There is usually a trade off between quality and interest earned that has to be evaluated by investors. Utility bonds are offered by such utilities as gas, electric and telephone companies. They vary in quality and yields. How to Buy Bonds are bought and sold through stock brokers.