Question: What Are Municipal Bonds?
Answer: Municipal bonds are issued by various cities. Muni's, as they are called, are attractive to individual investors in higher tax brackets because the interest income is tax free. As a result, they generally have have slightly lower interest rates than taxable bonds. You can buy them from a registered municipal bond seller, or indirectly through a municipal bond fund.
Since very few cities default, municipal bonds are considered very low risk. Most individual municipal bond holders do not sell during the life of the bond, but those that do find the price of the bond itself changes based on supply and demand in an open market.
(Source: Investing in Bonds.com)