Competitive yields are suddenly giving municipal bond exchange traded funds (ETFs) a new level of attractiveness to investors.
Muni bond ETFs are the new kids on the block; the first ones didn’t appear until last September.
On Feb. 1, the Market Vectors Lehman Brothers AMT-Free Intermediate Municipal Index (ITM) was yielding 3.49%. It targets the 6- to 16-year part of the yield curve, reports David Hoffman for Investment News. Another bonus: the yield paid out by munis is free from federal taxation, making their effective income greater than the taxable yield offered right now by Treasury bonds.
Other comparable muni ETFs tell a similar story: the PowerShares Insured National Muni Bond (PZA) had a yield of 4.2% yield, with a tax equivalent yield of 6.46%.The iShares S&P National Municipal Bond Fund (MUB) had a yield of 3.44%, but the tax equivalent yield was 5.07%. The SPDR Lehman Municipal Bond ETF (TFI) yielded 3.34%, with a tax equivalent of 5.14%.