Municipal Bond ETFs: A Safer Alternative to High Yield June 4, 2021
Credit spreads are tightening, which could be causing investors to shy away from the extra risk associated with high yield, but there are safer options like municipal bonds and the
The past month saw equities get racked with a bout of volatility as inflation fears put investors in a state of unease. Given that rates are still low by historical standards, fixed income investors may be starting to weigh in the risks of higher yield.
“The US junk bond market has begun wavering on rising inflation worries, raising the risk that the powerful rally since the depths of the pandemic in the debt issued by the riskiest corporate borrowers may be coming to an end,” a Financial Times article noted. “The high-yield bond market has been a shelter for investors seeking to avoid the volatility in stocks and government bonds this year, but these riskier assets have now begun flashing signs of caution.”
May 26, 2021
U.S. president Joe Biden’s $2 trillion infrastructure proposal was expected to give municipal bonds a boost, and so far, the proof is in the pudding. Data from municipal bond space show that inflows have been surging, giving exchange traded fund (ETF) investors something to cheer about.
With Biden’s proposal, local and state government bonds are expected to help fund the ambitious plan to improve the country’s infrastructure. From the traditional roads and bridges to new initiatives to bolster internet access and renewable energy sources, municipal bonds will be at the forefront of the plan’s funding.
For Debt Stability and Tax Exemption, Consider Muni Bond ETFs May 12, 2021
With the tax deadline around the corner, it’s not too late to start thinking about next year by adding tax-free municipal bonds through assets like the
VTEB tracks the Standard & Poor’s National AMT-Free Municipal Bond Index, which measures the performance of the investment-grade segment of the U.S. municipal bond market. MUB seeks to track the investment results of the S&P National AMT-Free Municipal Bond IndexTM, which also measures the performance of the investment-grade segment of the U.S. municipal bond market.
The sampling approach means that both funds hold a subset of bonds within the index in order to replicate the yield, duration, and credit quality of the debt. This method allows the funds to avoid trading expensive bonds that could harm performance and, in addition, minimize tracking errors.
State Borrowing at 10-Year High, But Muni ETFs Still Going Strong January 13, 2021
The municipal bond market is experiencing a boom as more states seek to capitalize on low rates to issue new debt to cover rising costs. Municipal bond exchange traded funds continue to strengthen as income hunters look for more attractive yield-generating assets in a lower-for-longer rate environment.
Over the past three months, the
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (NYSEArca: TFI) was up 1.9%.
According to Refinitiv data, muni bonds for new projects hit $252 billion in 2020, after municipal bond issuance in 2020 was at its highest in a decade. The new borrowing put the total amount of outstanding municipal debt above $3.9 trillion for the first time since 2013, the Wall Street Journal reports.