“Once you decide what your allocation to fixed income is, you look for the best alternatives within fixed income — and munis make the most sense,” Thomas Metzold, a muni bond manager at Eaton Vance, said.
As both parties get more creative in tackling the fiscal cliff, tax-free status on munis has come into question. If any changes do occur, it will affect a large number of investors – over half of all muni bond interest income was claimed by investors with under $200,000 incomes, according to the IRS. [Muni Bond ETFs Tumble on Tax-Break Speculation]
Nevertheless, this tax-exempt topic has been turned down in the past because it was seen as an effective subsidy for the states and benefited citizens. [Is the Tax-Exempt Status of Muni Bond ETFs in Jeopardy?]
High-yield municipal bond ETF options include:
- Market Vectors High Yield Municipal Index ETF (NYSEArca: HYD): 4.72% 30-day SEC yield
- SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSEArca: HYMB): 4.16% 30-day SEC yield
Broad municipal bond ETFs include:
- iShares S&P National Municipal Bond Fund ETF (NYSEArca: MUB): 1.56% 30-day SEC yield
- SPDR Barclays Capital Municipal Bond ETF (NYSEArca: TFI): 1.56% 30-day SEC yield
For more information on munis, visit our municipal bonds category.
Max Chen contributed to this article.