Muni - Bonds fund seekers should consider taking a look at MFS Municipals High Income Fund A (MMHYX Quick QuoteMMHYX - Free Report) . MMHYX has 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 MMHYX 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

MMHYX finds itself in the MFS family, based out of Boston, MA. Since MFS Municipals High Income Fund A made its debut in February of 1984, MMHYX has garnered more than $1.79 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 1.64%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 5.41%, which places it in the top 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. Over the past three years, MMHYX's standard deviation comes in at 7.01%, compared to the category average of 10.84%. The fund's standard deviation over the past 5 years is 7.62% compared to the category average of 12.14%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For those that believe interest rates will rise, this is an important factor to consider. MMHYX has a modified duration of 8.36, which suggests that the fund will decline 8.36% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.77% means that a $10,000 investment should result in a yearly payout of $477.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.

MMHYX carries a beta of 0.81, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 1.25, 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, MMHYX has 35.54% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 17.99%, giving MMHYX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 35% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, MMHYX is a load fund. It has an expense ratio of 0.68% compared to the category average of 0.93%. MMHYX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should 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, MFS Municipals High Income Fund A ( MMHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, MFS Municipals High Income Fund A ( MMHYX ) looks like a good potential choice for investors right now.

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