Debt issued by US states, cities and other public bodies; interest is usually exempt from federal income tax, so headline yields look low until you gross them up.
Munis split into general obligation bonds backed by taxing power and revenue bonds backed by a specific project's cash flows. The market is enormous in issuer count and thin in trading, so liquidity is poor and pricing is often evaluated rather than traded.
The right comparison is the taxable-equivalent yield: the muni yield divided by one minus your marginal tax rate. That number, not the raw coupon, is what you compare with a corporate or a Treasury.
Example: a muni yields 3.40% and your federal marginal rate is 37%. The taxable-equivalent yield is 3.40% / (1 - 0.37) = 5.40%, which beats a 5.10% corporate of the same maturity and better credit.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.
Educational only, not advice. Spotted an error? Post in Site Feedback.