Attractive Government Bonds

by David Jenyns on September 30, 2009

Municipal bonds are those issued by states, cities and public agencies. The purposes of municipal bonds are familiar to every citizen. States issue bonds for highway construction, veterans’ pensions, institutional building, and conservation programs, to name just a few.


Cities and towns have a variety of local needs. The kinds of bonds issued to accomplish these purposes vary with the borrowers’ sources of income. Highest grade — and lowest yield — obligations are the “full faith and credit” bonds of agencies empowered to levy taxes. Otherwise, the features of municipal bonds vary little from those of corporates. Where tax revenues support the bond, the quality of the issue naturally will depend on the stability of the tax structure.

Where tax revenues support the bond, the quality of the issue naturally will depend on the stability of the tax structure. The long-range prospects of the community are not always easily determined, but municipal bond analysts can provide a judgment on its past reliability, on the current condition of its “ratables” (the property eligible for taxation), the population trend, and the vigor of its business community.

Topping the bond list for any investor should be United States Government bonds, particularly the Series E and H savings bonds.

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