The bond market is where governments and corporations raise money by selling bonds (or debentures) to investors. When municipalities need to finance major capital projects like water treatment plants or recreation centres, they may issue municipal bonds. Investors buy these bonds, lending money to the municipality in exchange for regular interest payments and return of the principal at maturity. Municipal bonds are generally considered safe investments because municipalities have stable tax revenues. The interest rates municipalities pay depend on their credit rating, market conditions, and bond terms. Provincial governments may also borrow on behalf of municipalities to secure better rates.