Hurricane Katrina has raised awareness of the potential impacts of hurricanes on municipalities, however, it remains unclear how natural disaster risk is perceived in the municipal bond market nationwide. I attempt to fill this gap by conducting an analysis to determine if natural disaster risk and disaster damage affect interest costs for municipal bond issuers in US during 2000-2010. Using county level natural hazard data, I find both disaster risk and damage matter in determining the interest costs for municipalities issuing debt, but only shortly after severe disasters. In the long run, there is no significant impact of natural disaster risk or disaster damage on municipal bond interest rate.