municipal bond

US term for tax-exempt bond issued by states and political subdivisions (such as cities and counties) to raise funds for certain public works, such as low income houses, bridges, and roads. Municipal bonds are redeemed with interest, and are either backed by the full taxing power of the government (as a general obligation bond) or their repayment is based on the specific revenue generated by the financed project (as a moral obligation bond). Often shortened to muni.