What is the meaning of Municipal bond (muni)?

Munis are debt securities issued by state or local governments or their agencies to finance general governmental activities or special projects, such as the construction of highways or hospitals. The interest on a muni is usually exempt from federal income taxes, and is also exempt from state and local income taxes, provided you live in the state where it was issued. However, any capital gains you realize from selling a muni are taxable. Although munis generally pay interest at a lower rate than do commercial or Treasury bonds having similar maturity periods, they appeal to investors in the highest tax brackets, who benefit most from their tax-exempt status.