Municipal bonds have a strong historical record of timely interest payments and timely repayment of principal. A municipal bond default is a rare event. Even in the depths of the most recent recession, no major US city, state, town, or school district with an investment-grade bond rating has defaulted on their general obligation (GO) debt; the one exception is Jefferson County in Alabama. (To reiterate, a default occurs when a bond issuer misses an interest payment or does not pay the principal exactly on time.) As a broad category, municipal bonds have much lower default rates than corporate bonds.
Next to US treasury bonds and instruments guaranteed by the US government (this includes CDs and bank obligations guaranteed by the federal government), it could be argued that municipal bonds are the next safest category of investment.
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