Municipal Notes and Bonds* are debt obligations of state or local governments, their political subdivisions, agencies, and authorities. Municipal Notes and Bonds represent the issuer's promise to pay a specified rate of interest on the principal amount of the security until its maturity and to pay the principal at a specified future date. Municipal securities consist of both long and short-term issues.
Terms and Structures
Maturity
Municipal notes are usually issued for periods of three months to one year. Municipal bonds are issued for periods from one year to 40 years.
Issued
New issues of municipal securities are sold weekly to groups of dealers (syndicates), which bid competitively for the issues against other syndicates. Seasoned issues are also available on any business day in the secondary market. Should you decide to sell your municipal security prior to its maturity, the price will vary with market conditions and interest rates.
Form
Most municipal securities are now issued in registered form. Other issuers elect to issue in book entry form only. Both may be held in Wachovia's Institutional Trust Services Custody Department.
Quoted
Municipal securities are quoted on a yield to maturity basis.
Rate Structure
Quoted yields on municipal securities tend to be lower than on taxable securities because of the tax advantages of municipal securities. However, for individuals and institutions in sufficiently high tax brackets, the taxable equivalent yield on municipal securities is generally much higher than on fully taxable securities.
Denominations
The standard denomination for Municipal Notes is $100,000, and for Municipal Bonds $5,000.
Security
General Obligation bonds are secured by the full faith, credit, and taxing power of the issuer. Revenue bonds are secured by the full pledge of specific revenues, such as water and sewer revenues, airport revenues, or stadium revenues.
Tax Status
Tax-exempt municipals are exempt from federal Income taxes, with the possible exception of alternative minimum tax. Tax-exempt bonds are generally exempt from income taxes in the state in which they are issued.
* Products and services are offered by Wachovia Capital Markets, LLC ("WCM").
Wachovia Securities is the trade name for the corporate and investment banking services of Wachovia Corporation and its subsidiaries, including Wachovia Capital Markets, LLC ("WCM"), member FINRA/SIPC.
Debt and equity underwriting, trading, research and sales, loan syndications agent services, and corporate finance and M&A advisory services are offered by WCM.
Mezzanine capital, private equity, municipal securities trading and sales, cash management, credit, international, leasing and risk management products and services are offered by various non-broker dealer subsidiaries of Wachovia Corporation.