There are risks inherent in investing. Municipal Bonds carry risks including:
Interest rate or market risks: An increase in interest rates may reduce the market value of a bond. Bond prices move inversely to interest rates. Long-term bonds are more exposed to interest rate risk than short-term bonds.
Duration risk: The sensitivity of a bond’s price to a one percent change in interest rates. The higher a bond’s duration, the higher its sensitivity to changes in interest rates.
Default risk: Changes in an issuer's financial condition can effect its abilty to pay outstanding debt obligations. This can adversely effect the market value of the investment as well.
Credit risks: Independent rating agencies (Moody's, S&P) evaluate the credit-worthiness of bond issuers and assign credit ratings indicating an issuer's ability to pay. Learn more about bond credit ratings here. It's important to note that credit ratings can change over time and a high credit rating does not guarantee a bond's market value stability or liquidity.