Municipal Bond Rates
Like any other bonds, when buying
municipal bonds, you will have to consider the municipal bond
rates. Some municipal bond rates are better than others.
However, when considering and comparing municipal bond rates to
other bond rates, you should take into account the tax benefits
of municipal bonds.
What are municipal bond rates?
What people often refer to as municipal bond
rates are coupon rates. A coupon rate is the interest rate
given as a percentage of par value. That means, when you
see a municipal bond with a rate of, say, 6%, it means the
municipal bond is paying interest as a % of par value or $60
The municipal bond rates are not the prices
of the municipal bonds or the municipal bond yields. The price
of a municipal bond is the amount of bond sold at the end of
the previous trading day as a percentage of par value.
The municipal bond yields are the rates of
return of the municipal bonds which should be used to compare
municipal bonds against each other and compare municipal bonds
against other types of bonds and other types of
Best municipal bond rates
Of course, the best municipal bond rates are
the highest rates. However, most of the time it is difficult to
find low cost municipal bonds with high rates. When seeing
lower municipal bond rates compared to other bond rates, many
bond investors choose to invest in other types of non-tax
exempt bonds such as corporate bonds.
However, if they calculated the municipal bond yields they
might find out that munis with lower rates actually give better
yield than corporate bonds with higher rates. There are many
factors that affect municipal bond rates.