What does exempt interest from state obligations mean?

Exempt interest from state obligations  - exempt-interest dividends are interest dividends paid on municipal bonds that are not subject to federal income tax and are usually exempt from state tax by the states where they are issued.

Municipal bonds, sometimes referred to as munis, are issued by various government entities such as states, counties and municipalities. The income from these bond funds is typically exempt from federal taxes and, if issued within your state, the interest will also be free of state income taxes. This means that municipal bond investors don't need to pay tax on the income from these funds.