What is a high quality bond?

What is a high quality bond?

Very short-term, high-quality bond funds are going to pay slightly higher rates of interest than money market funds and CDs but less than longer-term bond funds. Sometimes referred to as near-cash, these bond funds are often the best investments for money that you may need to tap within one to three years.

What is a high grade municipal bond?

High yield munis are bonds issued by state or local governments. They are unrated by the major rating agencies; or, they have credit ratings that are below investment grade. A different set of risks: Investment-grade municipal bonds are more affected by interest rate risk and less affected by credit risk.

What are the two types of municipal bonds?

There are two major types of municipal bonds: “general obligation bonds” and Investor Assistance (800) 732-0330 www.investor.gov Page 2 “revenue bonds.” Because these types come in many varieties, you should look beyond the short-hand label when deciding whether to purchase.

What are municipal bonds simple definition?

Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems. Generally, the interest on municipal bonds is exempt from federal income tax.

What is the highest bond rating?

Bond ratings are expressed as letters ranging from “AAA”, which is the highest grade, to “D”, which is the lowest grade.

Why are high-yield bonds called junk bonds?

A junk bond is debt that has been given a low credit rating by a ratings agency, below investment grade. Because of the higher risk, investors are compensated with higher interest rates, which is why junk bonds are also called high-yield bonds.

What are some examples of municipal bonds?

Municipal bonds are debt investments issued by state and local government entities to raise money to fund operations or certain projects….Common examples include:

• Roads, highways, bridges, and other infrastructure.
• Hospitals.
• Schools and libraries.
• Government buildings.
• Power plants.
• Sewer systems.

What is municipal bonds example?

A municipal bond is a debt security that has been issued by a local government entity. Examples of these issuers are state, county and city governments. Municipal bonds are commonly used to fund the construction of roads, schools, airports, hospitals, wastewater treatment facilities and other infrastructure projects.

Are municipal bonds a good investment?

On the plus side, highly-rated municipal bonds are generally very safe investments compared to almost any other investment. The default rate is tiny. As with any bond, there is interest rate risk. If your money is tied up for 10 or 20 years and interest rates rise, you’ll be stuck with a poor performer.

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