Investors are increasingly turning to the municipal bond market as a source of tax-exempt income. The bonds, issued by state and local governments, provide a way for investors to earn interest that is typically free from federal, and sometimes state and local, income taxes.

The attractiveness of municipal bonds has also been bolstered by rising interest rates. As rates climb, the yields on these bonds become more competitive compared to other fixed-income investments. This makes them a compelling option for investors seeking both tax advantages and potentially higher returns.

Financial advisors often recommend municipal bonds as part of a diversified investment strategy, particularly for individuals in higher tax brackets. The tax benefits can significantly enhance the overall return on investment, making them a valuable tool for wealth management.