There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is PIMCO High Yield Municipals Bond A (PYMAX Quick QuotePYMAX - Free Report) . PYMAX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify PYMAX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as "general obligation" bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

PIMCO Funds is based in Newport Beach, CA, and is the manager of PYMAX. PIMCO High Yield Municipals Bond A debuted in August of 2006. Since then, PYMAX has accumulated assets of about $1.39 billion, according to the most recently available information. David Hammer is the fund's current manager and has held that role since August of 2015.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. PYMAX has a 5-year annualized total return of 2.14%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of PYMAX over the past three years is 7.25% compared to the category average of 11.07%. Looking at the past 5 years, the fund's standard deviation is 7.52% compared to the category average of 12.13%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

If you believe interest rates will rise, this is an important factor to look at. PYMAX has a modified duration of 7.87, which suggests that the fund will decline 7.87% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.96% means that a $10,000 investment should result in a yearly payout of $496.

A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

With a beta of 0.7, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PYMAX has a positive alpha of 1.39 , which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade "AAA" to "D" given to a bond that indicates its credit quality. With this letter scale in mind, PYMAX has 38.8 in high quality bonds rated at least "AA" or higher, while 30.8% are of medium quality, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 30.4%, giving PYMAX an average quality of A. This means that it focuses on high quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PYMAX is a load fund. It has an expense ratio of 0.85% compared to the category average of 0.93%. From a cost perspective, PYMAX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, PIMCO High Yield Municipals Bond A ( PYMAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PYMAX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.