Municipal Bond Market is a place where Municipal Bonds are bought and sold. Municipal Bonds are actually a kind of bond which is normally issued by municipalities, counties, schools, states and any other governmental organizations others to raise money and develop some existing structures or fulfill some new projects. One can have two types of Municipal Bond Market. They are:
Primary Municipal Bond Market
Secondary Municipal Bond Market
Primary Municipal Bond Market: Primary Municipal Bond Market works in a way through which one can buy the municipal bonds directly from the organization that is issuing this kind of municipal bonds at the time when the Municipal Bond is issued for the first time. This primary Municipal Bond Market is a small part of the capital market which normally handles the securities which are newly issued. This process of buying new issued bonds are termed as the underwriting. All these dealings are normally done through the dealers who also get an amount of commission on the basis of the amount of bonds he has helped the organization to sell. If the Municipal Bonds are issued directly issued by the municipality or other governmental organization then it is called a primary issue. The primary Municipal Bond Market plays a crucial role of facilitating in the economy of a state or county a capital formation.
Secondary Municipal Bond Market: The secondary Municipal Bond markets work in a way through which the buyer and the sellers transfer the municipal bonds between themselves. As these municipal bonds are not bought directly from the organization that had issued it but the primary buyer of the bond it can be easily sold to someone else . That is why it is called the secondary Municipal Bond Market. Before the invention of electronic means the only way one could buy and sell in the secondary Municipal Bond Market by verbal means but nowadays with the inventions of electronic processes the secondary municipal bond market also works through electronic methods as well. The Secondary Municipal Bond Market is considered as a very vital means of capital market in the modern era.