Series 6: 1.2.1.5.3. Municipal Bonds

1.2.1.5.3.  Municipal Bonds

A municipal bond is a type of bond issued by states, cities, and counties to raise capital for day-to-day operations. These bonds differ from corporate and other government bonds because they are generally exempt from federal government oversight. As a result, municipal bond issuers do not have to publish a prospectus. Instead, they offer a less detailed disclosure document called an official statement.

The preparation of the official statement is completed in two steps. The preliminary official statement describes the pertinent details of the municipal bond issue before its price and interest rates have been determined. Once the pricing elements have been decided, they are added to the preliminary official statement, and the new document is published as the final official statement.

The preliminary official statement details the purposes and essential terms and conditions of the bond issue, such as the loan amount, maturity structure of the bond (whether serial or term), and redemption provisions (if the bond is callable). Other essential information includes the financial and economic characteristics of the issuer, th