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Not all munis are tax-exempt. One is Reno's 0's of '33, a rev bond. When I bought it, 4/8/15, it was Baa2 --since upgraded to Baa1--, and it has always been insured, which corporates never are, though 1st liens are just as good.

Anyhow, very few muni zeros come to market, except for school districts which favor them. Because they tend to be long-dated and offer no current income, most bond investors would avoid them.

The downside of zeros is taxes have to be paid on the implied gains, which are considered 'income' and taxed at that rate. But if the zero is put into an IRA, on which the tax-rate will be the ord inc rate anyway, then taxes can be deferred and --if the position fails-- all that's lost is the purchase-price.

Here's the numbers. Bought 4/8/15 at 39.25. Currently MTM at 79.48. Divide the 202.49% gain by the 5.809 yr holding period, take the compound root, and you can see that the annualized gain is a decent 12.9%.

The average bond investor wouldn't have acted on that opportunity, nor is it covered in the intro bond books.
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