They are what municipalities use to raise money for water and sewer systems, schools and hospitals. The securities represent the issuer's promise to pay a specified principal amount at maturity prior to redemption and a specified coupon rate. Taxable and tax-free securities are available. However, interest on Illinois issues is subject to state and local taxes. Municipal Securities are actively traded, so the price will fluctuate with market conditions.
Yields are lower than on taxable issues.
Because Municipal Securities are not FDIC insured, be sure to find Municipal Securities that are privately insured by the issuer and rated AAA as a result of the insurance. Municipal Bonds are issued with maturities from one to 30 years and pay interest semi-annually. Municipal Notes are short-term obligations with maturities of six months to three years. Interest can be paid either semi-annually or at maturity. Taxable Municipal Bond and Note issues are the same as tax free Municipal Securities, except as the name implies, they are not exempt from income taxation.