Insured Municipal Bond
A muni with third-party insurance guaranteeing principal and interest.
What is Insured Municipal Bond?
A bond insurer guarantees timely payment, so the bond generally carries the insurer's credit rating rather than the issuer's. The insurance protects against default only - not against price declines from rising rates.
Insured Municipal Bond: a worked example
An unrated small-town issue becomes AA-rated with insurance, lowering the town's borrowing cost.
More terms in Bonds & Cash Equivalents
Certificate of Deposit (CD)
A bank time deposit paying a fixed rate for a fixed term, FDIC insured.
Commercial Paper
Unsecured short-term corporate debt, 270 days or less.
Treasury Inflation-Protected Securities (TIPS)
Treasuries whose principal adjusts with the CPI.
Zero-Coupon Bond
Sold at a deep discount, pays no interest, matures at par.
Asset-Backed Securities (ABS / MBS)
Bonds backed by pools of loans - mortgages, auto loans, credit cards.
General Obligation (GO) Bond
A municipal bond backed by the issuer's full faith, credit, and taxing power.
Revenue Bond
A municipal bond repaid only from the revenue of a specific project.
Municipal Bond Tax Treatment
Interest usually federally tax-free; gains are not.