Municipal Bonds Rating

The municipal bond market is one of the largest bond markets in the world. Today, more than 5 million households own municipal bonds. The widespread appeal of municipal bonds is primarily due to their steady stream of income that is exempt from federal income taxes, and in some cases state and local income taxes as well.

Ratings of Municipal Bonds

Municipal bonds rating or the merit of municiple bonds depend on whether the bond is backed by the full faith, credit, and taxing powers of the municipality or by revenues generated by the municipal facility the bond issue finances. Consider issuer-specific information such as the wealth of the community, characteristic of the issuer, revenue stream of the project the bond is used to fund.

There are also rating services, such as Standard & Poor's, and Moody's and Fitch's to evaluate the credit quality of municipal bonds and publish their municipal bonds ratings, just to assist those investing tax free.

Moody's short term MIG ratings are from MIG 1 (the best) through MIG4 (acceptable). If a note is speculative, it is listed as s6. S&P's rates notes SP-1, SP-2, SP-3, and Fitch rates notes between F-1, F-2, and F-3.