Series 65: 2.13.5. Municipal Notes

2.13.5. Municipal Notes

Municipal notes are short-term debt obligations whose term may last from three months to three years; most often, though, their duration does not exceed a year. Like Treasury bills, they obligate the issuer to pay a specified principal by a certain date, and also like T-bills, municipal notes sell at a discount to par in lieu of paying interest. They are zero coupon securities, in other words. The primary purpose of municipal notes is to meet an agency’s cash flow needs in anticipation of the taxes, fees, or other sources of revenue that fund its ongoing commitments.

Municipal notes are called anticipation notes because they are issued in anticipation of an expected source of income. Anticipation notes allow a project to get under way before funding has be