Below-Investment-Grade Municipal Bond

Below-investment-grade municipal bonds are debt securities, issued by state and local governments.... Below-investment-grade municipal bonds are debt securities, issued by state and local governments. In terms of credit risk that a bond issuer may default, as determined by rating agencies Moody’s and Standard and Poor’s (S&P), these securities fall in between low-risk investment-grade municipal bonds and high-risk junk municipal bonds. These securities are typically rated below Baa3 by Moody's, or below BBB by S&P. Below-investment-grade bonds are riskier than their investment-grade counterparts, often because the associated revenue streams generated by their issuers are relatively unpredictable. As such, these bonds are not appropriate for conservative investors focused on not losing their investment. However, the higher interest payments that come with below-investment-grade bonds can make them attractive for investors with a greater risk tolerance. Like other municipal bonds, the interest payments from these securities are typically exempt from federal taxation. Interest payments can be also tax-free at the state level if investors are residents of the state issuing the bonds. Last Updated: 04/24/2024 View more View less

Below-investment-grade municipal bonds are debt securities, issued by state and local governments. In terms of credit risk that a bond issuer may default, as determined by rating agencies Moody’s and Standard and Poor’s... Below-investment-grade municipal bonds are debt securities, issued by state and local governments. In terms of credit risk that a bond issuer may default, as determined by rating agencies Moody’s and Standard and Poor’s (S&P), these securities fall in between low-risk investment-grade municipal bonds and high-risk junk municipal bonds. These securities are typically rated below Baa3 by Moody's, or below BBB by S&P. Below-investment-grade bonds are riskier than their investment-grade counterparts, often because the associated revenue streams generated by their issuers are relatively unpredictable. As such, these bonds are not appropriate for conservative investors focused on not losing their investment. However, the higher interest payments that come with below-investment-grade bonds can make them attractive for investors with a greater risk tolerance. Like other municipal bonds, the interest payments from these securities are typically exempt from federal taxation. Interest payments can be also tax-free at the state level if investors are residents of the state issuing the bonds. Last Updated: 04/24/2024 View more View less