Many municipality bonds are usually the general obligation bonds (GO). This actually means the issuing authority can use your money in a way it deems fit, like paying for janitors in the country hospital or to buy some fresh cars for the police.

Some municipal bonds may only be used for some specified purposes. Like for instance these funds can be used by the country to carpet a tool road. Now the tool which will be collected from the motorist will be used for repaying the owners of the bond.

Many people consider the GO bonds as a safer option as government can usually pay the interest from any type of money it collects, like speeding ticket fine or some taxes. These are considered safer bonds. This is so because the tool booths of the municipality will usually continue to churn in money even if the tax base for property moves downhill.

Historically it has been seen that municipal bonds usually low return rate. The huge attraction of the municipal bond is due to its tax free interest on the federal scale. For this reason, the bonds usually have interest rates which are normally lower than those of the corporate bonds. As a result many big investors having a high tax rate park their funds in the municipality bonds for reducing their federal taxes. These bonds though are not that advantageous for the lower tax bracket investors.

These bonds are also not best for the tax sheltered investment schemes like the Roth or the conventional IRAs. This is so because the tax free income accumulating in their retirement account is total waste for its tax shelter facility. The interest income accruing from the bonds is usually taxable by states as well as cities.

You have a choice of thousand of municipality bonds to choose from but these are not that easy to purchase. The bond brokers usually like to service the large institutions which spend huge amount of dollars on these bonds.