Many municipal bond (muni) investorschoose bonds issued in their homestate because the interest is usuallyexempt from state taxes, which increasesthe taxable-equivalent yield. But the munimarket is so diverse, buyers with the timeand ambition to shop around may findout-of-state bonds that offer a betterdeal. In states where muni yields tend tobe low, the hunt for out-of-state muniscould pay off. Residents of high-tax stateslike New York and California are eagerto buy their state's munis, driving upprices and pushing yields, which move inthe opposite direction, to less attractivelevels. In states with no income tax, likeWashington, demand is lower, leading tolower prices and higher yields.