Bonds issued by the federal treasury offer lower interest rates, but are guaranteed by the US government. Treasury bonds are exempt from state and local taxes. State and local governments can also issue bonds. These municipal bonds are exempt from federal income taxes, and some are also exempt from state and local taxes. Because of this tax advantage, municipal bonds offer lower interest rates. Tax-free municipal bonds are most advantageous to investors in high tax brackets, for whom the higher interest rates of corporate bonds are outweighed by the taxes that would be associated with it [1].