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4 High-Yield Muni Bond Funds to Buy on Strong Inflows
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Investors are shifting their focus from equity funds to muni bond funds. According to Lipper’s fund flow report, muni bond funds have registered 49 straight weeks of gains. Also, muni bond markets have registered the longest streak of monthly gains in 24 years, according to data released by BlackRock.
Hence, investing in muni bond funds might be a sensible investment option. Munis have not only posted respectable gains this year, but the income earned from these bond funds is also exempted from federal taxes and sometimes even from state taxes. Further, to better our choice, we have opted for high-yield muni bond funds.These are less vulnerable to rate hike fluctuations and offer better returns than the other bonds.
Muni Bond Funds Post Steady Inflows
As per the latest Lipper weekly fund flow report, equity-based funds have seen heavy outflows, whereas muni bond funds continued to attract investor attention. According to Lipper, the U.S. based muni bond funds registered net inflows of $1.057 billion for the week ending September 7, preceded by an inflow of $428 million posted a week earlier. The category saw inflows for 49 consecutive weeks, registering its second-longest stretch in history.
Moreover, high-yield funds reported inflows of $610 million after posting outflows of $387 million in the earlier week. This data confirms that high-yield muni bond funds are satisfactory investments amid rising rate hike concerns.
Munis Notch 14 Straight Monthly Gains
As per the BlackRock report, in August muni bond funds saw monthly gains for 14 consecutive months. Such an impressive stretch was not seen before 1992. Further, the S&P 500 National Municipal Bond Index returned 4.6% as of August 31 and 0.23% in August. Through such periods, munis now see YTD net inflows totaling roughly $47.3 billion.
Moreover, the Municipal Securities Rulemaking Board reported that the trading volume of U.S. municipal bonds jumped to $818.2 billion during the second quarter of this year, the largest volume witnessed in nearly three year. It also represents a 10.4% surge in trade volume from the year-ago period. The report also showed that buying activity rose nearly 8.1% year over year to $6.44 billion during the last quarter.
Why Buy High Yield Muni Bond Funds?
Municipal bonds are favorable investments presently because of their consistent net inflows and a positive return streak. Munis are generally debt securities that are exempted from federal income taxes and state income taxes. Investors seeking steady flow of tax free income and looking to reduce their tax liability might invest in municipal bonds.
Further, high-yield bonds tend to offer better returns than investment grade bonds. High-yield bonds have a comparatively higher coupon rate, which makes it less susceptible to rate fluctuations. Moreover, as these bond funds have a shorter maturity period, they have lower risk than interest rate change.
So, mutual funds with strong exposure to high-yield muni bonds are considered as prudent investment options. According to Morningstar, the high-yield muni mutual fund posted three-month, year-to-date (YTD) and one-year returns of 1.4%, 6.3% and 9.6%, respectively.
Buy These 4 High Yield Muni Funds
This encouraging backdrop calls for investors’ attention to four high yield muni mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) and have encouraging yields. Moreover, these funds have impressive YTD one-year and three-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Nuveen CA High Yield Municipal Bond A (NCHAX - Free Report) invests a large chunk of its assets in debt securities issued by municipal bodies that are expected to provide return free from regular federal and California personal income tax. NCHAX seeks a high level of tax-exempted current income.
NCHAX has an annual expense ratio of 0.85%, lower than the category average of 0.88%. The fund has YTD, one-year and three-year annualized returns of 7.4%, 12.1% and 13.1%, respectively. Annual dividend yield of the fund is 3.5%.
Invesco High Yield Muni Y (ACTDX - Free Report) seeks current income exempted from federal tax. ACTDX invests the majority of its assets in municipal securities, with more than 75% of its investment are made in municipal securities with high yield.
ACTDX has an annual expense ratio of 0.61%, lower than the category average of 0.94%. The fund has YTD, one-year and three-year annualized returns of 7.2%, 11.4% and 11.3%, respectively. Annual dividend yield of the fund is 4.7%.
Dreyfus High Yield Municipal Bond Z (DHMBX - Free Report) invests the bulk portion of its assets in municipal securities which offer income exempted from federal tax. DHMBX seeks growth of both income and capital.
DHMBX has an annual expense ratio of 0.92%, lower than the category average of 0.94%. The fund has YTD, one-year and three-year annualized returns of 8.4%, 12.9% and 9.8%, respectively. Annual dividend yield of the fund is 4.1%.
JHancock High-Yield Municipal Bond A (JHTFX - Free Report) seeks high level of tax exempted income. JHTFX invests more than 80% of its assets in municipal bonds of any maturity and from any particular region or state.
JHTFX has an annual expense ratio of 0.90%, lower than the category average of 0.94%. The fund has YTD, one-year and three-year annualized returns of 6%, 8.8% and 7.9%, respectively. Annual dividend yield of the fund is 4.3%.
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4 High-Yield Muni Bond Funds to Buy on Strong Inflows
Investors are shifting their focus from equity funds to muni bond funds. According to Lipper’s fund flow report, muni bond funds have registered 49 straight weeks of gains. Also, muni bond markets have registered the longest streak of monthly gains in 24 years, according to data released by BlackRock.
Hence, investing in muni bond funds might be a sensible investment option. Munis have not only posted respectable gains this year, but the income earned from these bond funds is also exempted from federal taxes and sometimes even from state taxes. Further, to better our choice, we have opted for high-yield muni bond funds.These are less vulnerable to rate hike fluctuations and offer better returns than the other bonds.
Muni Bond Funds Post Steady Inflows
As per the latest Lipper weekly fund flow report, equity-based funds have seen heavy outflows, whereas muni bond funds continued to attract investor attention. According to Lipper, the U.S. based muni bond funds registered net inflows of $1.057 billion for the week ending September 7, preceded by an inflow of $428 million posted a week earlier. The category saw inflows for 49 consecutive weeks, registering its second-longest stretch in history.
Moreover, high-yield funds reported inflows of $610 million after posting outflows of $387 million in the earlier week. This data confirms that high-yield muni bond funds are satisfactory investments amid rising rate hike concerns.
Munis Notch 14 Straight Monthly Gains
As per the BlackRock report, in August muni bond funds saw monthly gains for 14 consecutive months. Such an impressive stretch was not seen before 1992. Further, the S&P 500 National Municipal Bond Index returned 4.6% as of August 31 and 0.23% in August. Through such periods, munis now see YTD net inflows totaling roughly $47.3 billion.
Moreover, the Municipal Securities Rulemaking Board reported that the trading volume of U.S. municipal bonds jumped to $818.2 billion during the second quarter of this year, the largest volume witnessed in nearly three year. It also represents a 10.4% surge in trade volume from the year-ago period. The report also showed that buying activity rose nearly 8.1% year over year to $6.44 billion during the last quarter.
Why Buy High Yield Muni Bond Funds?
Municipal bonds are favorable investments presently because of their consistent net inflows and a positive return streak. Munis are generally debt securities that are exempted from federal income taxes and state income taxes. Investors seeking steady flow of tax free income and looking to reduce their tax liability might invest in municipal bonds.
Further, high-yield bonds tend to offer better returns than investment grade bonds. High-yield bonds have a comparatively higher coupon rate, which makes it less susceptible to rate fluctuations. Moreover, as these bond funds have a shorter maturity period, they have lower risk than interest rate change.
So, mutual funds with strong exposure to high-yield muni bonds are considered as prudent investment options. According to Morningstar, the high-yield muni mutual fund posted three-month, year-to-date (YTD) and one-year returns of 1.4%, 6.3% and 9.6%, respectively.
Buy These 4 High Yield Muni Funds
This encouraging backdrop calls for investors’ attention to four high yield muni mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) and have encouraging yields. Moreover, these funds have impressive YTD one-year and three-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Nuveen CA High Yield Municipal Bond A (NCHAX - Free Report) invests a large chunk of its assets in debt securities issued by municipal bodies that are expected to provide return free from regular federal and California personal income tax. NCHAX seeks a high level of tax-exempted current income.
NCHAX has an annual expense ratio of 0.85%, lower than the category average of 0.88%. The fund has YTD, one-year and three-year annualized returns of 7.4%, 12.1% and 13.1%, respectively. Annual dividend yield of the fund is 3.5%.
Invesco High Yield Muni Y (ACTDX - Free Report) seeks current income exempted from federal tax. ACTDX invests the majority of its assets in municipal securities, with more than 75% of its investment are made in municipal securities with high yield.
ACTDX has an annual expense ratio of 0.61%, lower than the category average of 0.94%. The fund has YTD, one-year and three-year annualized returns of 7.2%, 11.4% and 11.3%, respectively. Annual dividend yield of the fund is 4.7%.
Dreyfus High Yield Municipal Bond Z (DHMBX - Free Report) invests the bulk portion of its assets in municipal securities which offer income exempted from federal tax. DHMBX seeks growth of both income and capital.
DHMBX has an annual expense ratio of 0.92%, lower than the category average of 0.94%. The fund has YTD, one-year and three-year annualized returns of 8.4%, 12.9% and 9.8%, respectively. Annual dividend yield of the fund is 4.1%.
JHancock High-Yield Municipal Bond A (JHTFX - Free Report) seeks high level of tax exempted income. JHTFX invests more than 80% of its assets in municipal bonds of any maturity and from any particular region or state.
JHTFX has an annual expense ratio of 0.90%, lower than the category average of 0.94%. The fund has YTD, one-year and three-year annualized returns of 6%, 8.8% and 7.9%, respectively. Annual dividend yield of the fund is 4.3%.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>