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Municipal Bond ETFs: What Investors Need to Know

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  • (1:10) - What Are Municipal Bonds And How Are They Used?
  • (6:30) - Is It Possible For Municipal Bonds To Lose Their Tax Exemption?
  • (9:30) - Breaking Down The Current Finances In The Industry: Who Are The Best and Worst Rated
  • States?
  • (14:40) - What Are The Best Opportunities For Municipal Bonds Right Now?
  • (18:25) - Exploring VanEck’s Municipal Bond ETF Suite
  • (25:15) - Episode Roundup: SMB, ITM, XMPT, MUB, SCMB
  • Podcast@Zacks.com

 

In this episode of ETF Spotlight, I speak with Michael Cohick, Director of ETF Product, and Tamara Lowin, Senior Municipal Credit Analyst at VanEck, about municipal bond investing.

Bonds have regained favor among investors, primarily due to yields not witnessed since the financial crisis. Fixed income ETFs have attracted significant inflows this year as bonds are now considered a viable alternative to stocks.

Municipal bonds, issued by state and local governments, serve to finance a wide array of capital projects, including schools, roads, bridges, and public transportation systems.

Interest earned from municipal bonds is typically exempt from federal income taxes and often from state income taxes in the state of issuance, making them an especially appealing investment for high-income taxpayers.

Despite recent headlines alluding to the potential loss of federal tax exemption for municipal bonds, VanEck strategists believe that this asset class will maintain its tax-exempt status.

Fitch Ratings downgraded the U.S. government's credit rating, citing concerns about the growing debt burden and political dysfunction in Washington. According to VanEck, due to the unique strengths of municipal borrowers, they are likely to maintain or even surpass the credit ratings of the U.S. government.

Treasury bonds are on track for a record third consecutive annual decline, primarily driven by losses in longer maturities. Should investors concentrate on shorter-duration municipal bonds or extend their duration to lock in higher rates for an extended period?

The VanEck Short Muni ETF (SMB - Free Report) and the VanEck Intermediate Muni ETF (ITM - Free Report) provide exposure to short-term and intermediate-term tax-exempt bond market.

The iShares National Muni Bond ETF (MUB - Free Report) is the most popular fund in the space, while the Schwab Municipal Bond ETF (SCMB - Free Report) is the cheapest.

Tune in to the podcast to learn more.

Make sure to be on the lookout for the next edition of the ETF Spotlight and remember to subscribe! If you have any comments or questions, please email podcast@zacks.com.

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