In 2012, about $51 billion has flowed into municipal-bond mutual funds and ETFs. “To put that in perspective: Municipal-bond funds have been around since 1976, and fully a 10th of their $510 billion in total assets came in over the past 11 months,” he writes.
All that buying has driven muni yields down to their lowest since at least the 1960s, the WSJ notes. Bond yields and prices move in opposite directions.
Another potential risk for muni bond ETFs is that Congress may tinker with the tax-exempt status of the asset class to boost government revenue. Although munis have faced similar talk before, the financial pressure on Washington is so dire that “the threat is real,” George Friedlander, chief municipal strategist at Citigroup, said in the report.
iShares S&P National AMT-Free Municipal Bond Fund
