Almost all municipal bonds in existence today are registered, as required by federal law in order for the interest on the bonds to qualify for federal tax-exempt status. Bond owners are kept on record by a registrar, which maintains a list of bondholders for the issuer. That record is updated each time a bond is sold, and principal and interest are payable only to the registered owner.
In lieu of a physical bond certificate that is transferred when bonds are sold, most municipal bonds are issued in book-entry form and tracked electronically.
