What is a bond issued by a state, county, or city government called?

A bond issued by a state, county, or city government is known as a municipal bond. These bonds are often used to fund public projects, such as the construction of schools, highways, and other infrastructure that benefits the community. Municipal bonds are attractive to investors primarily because the interest earned on them is typically exempt from federal taxes, and in some cases, state and local taxes as well. This tax advantage makes them a popular choice for individuals in higher tax brackets looking to invest while minimizing their tax liabilities.

Municipal bonds come in two main types: general obligation bonds, which are backed by the full faith and credit of the issuing government, and revenue bonds, which are repaid from the income generated by the specific projects they fund. Their inherent safety, due to the backing of governmental authority, also contributes to their appeal among conservative investors who prefer stable, low-risk investment options.