Investing Tax Free

Municipal Notes

Most people have heard of municipal bonds but few people have heard of municipal notes. Municipal notes are shorter term investments than municipal bonds. In the same way there are municipal bond ratings, there are municipal note ratings published by bond rating agencies to help investors decide which municipal notes are good investments for them. Below are municipal notes explained.

What are municipal notes?

Municipal notes are also called municipal anticipation notes which are short term securities. Municipal notes generate funds for a municipality that expects other revenues in the near future.

The maturities of municipal notes range from 3 months to three years with most of them being a year or less. Municipal notes are repaid when the issuing municipality receives the funds expected.

Types of municipal notes

There are many categories of municipal notes as listed below.

TANs Tax Anticipation notes

Revenue anticipation notes

TRANs Tax and revenue anticipation notes
BANs Bond anticipation notes
CLNs Construction loan notes

There are also tax exempt commercial paper and variable rate demand notes.

Some municipal notes (and municipal bonds) are issued with variable or floating interest rates. That means as the bond market changes, the coupon of the municipal bond or the municipal bond interest rates change accordingly. Since the municipal bond rates change, its price remains quite stable.