Municipal bonds, often called "munis," are debt securities issued by local or state governments to finance public projects like schools, highways, and hospitals. When you buy a municipal bond, you are essentially lending money to the government in exchange for regular interest payments and the return of your principal at maturity. These bonds are generally considered low-risk investments. One of the main benefits of municipal bonds is that the interest earned is often exempt from federal income tax, and sometimes state and local taxes as well. This makes them an attractive option for investors looking to preserve their wealth while supporting community development through projects funded by municipalities.