Despite the gains in muni bond ETFs this year, investors remain wary and the yield spread of high-yield munis over investment grade is higher than the long-run average, Lord Abbett said.
“With the economy stuck in low gear, Washington stalemated over the federal budget, and Europe threatening to implode in a debt crisis, investors continue to be skittish about any investment that carries some risk,” it added. “”Credit spreads remain above their historical average, but what is strange is that defaults are down compared to historical levels. In other words, although spreads have widened, credit quality is being maintained.”
Muni bond ETFs have moved higher since Harrisburg, Pa., filed for Chapter 9 bankruptcy in October. [Muni Bond ETFs Rise]
iShares S&P National AMT-Free Municipal Bond Fund
