1. Treasuries and Municipals

2.  US Treasury issued- default risk?  Still has interest rate market risk  Interest exempt from state and local taxes  Less risk = lower yield

3. T-billsT-notes and bonds  $10,000 minimum  1 year, 3 or 6 month  They pay interest upfront  Example  Auction/discount rate  2-10 years  $1,000 for 4+ years  $5,000 for shorter

4.  Issued by states, counties, and their agencies  Exempt from federal and state tax  Taxable equivalent yield  General obligation vs. Revenue  BIG disctinction  $5,000 minimum (pooled arrangements)

5.  Defaults are rare but….  Underwriter pays.1% to 2% premium  More attractive to investors  Issued to finance private business activities  Federal tax