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.
||Tax Anticipation notes
Revenue anticipation notes
||Tax and revenue anticipation
||Bond anticipation notes
||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