This characteristic provides these funds with a high degree of liquidity and safety. Moody's rates most of the publicly held corporate and municipal bonds and many Treasury and government agency issues. It also rates commercial paper, preferred and common stocks, and municipal securities. The agency's ratings are published in annual manuals that are supplemented by weekly updates. The securities are backed by a pool of residential mortgage loans.
Investors receive payments from the interest and principal on the underlying mortgages.
A municipal bond is a debt obligation issued by a state or local government. The funds raised from the sale of the debt instrument may be used for general government needs or special projects. Public purpose bonds are tax exempt and can be issued without limitation. Investor income from this bond type is usually exempt from federal taxes. In some issuing states, the bonds are also exempt from state and local taxes, if the bondholder is a legal resident of the state.