What is Foolsaurus?   Municipal Bonds vs. States Liquidity
Problems  Original post by Geri Terzo of Demand Media  States
that are facing liquidity problems and cannot easily gain access
to capital may raise money through municipal bonds. Municipal
bonds can be issued by individual states or local government
agencies within a state. States face funding shortfalls for
various reasons, including poor budgeting or challenging
economic and market conditions. Offering bonds in the debt
markets can help a state to maintain infrastructure development
or prevent default on major financial obligations, for instance.
States that are facing liquidity problems may choose to issue
municipal bonds because of the terms associated with these
loans. The interest rates that states or municipalities are
obligated to pay to bond investors are typically lower than more
traditional borrowing rates. Corporations and the federal
government typically pay investors higher interest than
municipal bond issuers. Despite modest interest