What characterizes Type II securities?

Type II securities are characterized specifically as obligations issued by states and local governments, often referred to as municipal bonds, which are frequently used to finance projects such as housing and universities. These types of securities are distinct due to their origins in government entities and the specific purposes they serve, including funding for public services and infrastructure projects.

The nature of Type II securities implies that investors in these bonds can often benefit from tax exemptions, making them attractive for certain investment strategies. By focusing on the specific issuance of these obligations and their intended use, you can see why this choice effectively captures the essence of what characterizes Type II securities.