During economic and market uncertainties, investors can shift their funds from stocks to the relative safety of bonds. Depending on your income, the advantage of holding bonds is the periodic payment of interest. For example, given a bond with a face value of $1,000, the 5% coupon pays interest of $50 per year. Some bond investments offer tax advantages. Interest payments on U.S. government bonds are not subject to tax at either the national or metropolitan level. as a result, the Treasury may be forced to offer certain tax refunds to people living on high personal incomes. Notably, municipal bonds are exempt from federal and local taxes. They are also exempt from state taxes in the state in which they are located