Gross has also upped his position in municipal bonds as a result of the securities’ stability compared to other fixed-income assets – munis could return more than federal debt when considering volatility.

Somee municipal bond watchers are wary of potential changes to the tax-exempt status on municipal bonds. Observers warn that Congress could curb the tax exemption as a way to help lower the government’s runaway deficits. However, such a move seems unlikely and would be met with significant resistance.

Some municipal bond ETFs include:

  • iShares S&P National Municipal Bond Fund (NYSEArca: MUB): 1.57% 30-day SEC yield
  • SPDR Nuveen Barclays Capital Short Term Municipal Bond ETF (NYSEArca: SHM): 0.41% 30-day SEC yield
  • SPDR Nuveen Barclays Capital Municipal Bond ETF (NYSEArca: TFI): 1.59% 30-day SEC yield
  • PowerShares Insured National Municipal Bond Portfolio (NYSEArca: PZA): 2.91% 30-day SEC yield
  • Market Vectors Intermediate Municipal Index ETF (NYSEArca: ITM): 1.76% 30-day SEC yield

For more information on munis, visit our municipal bonds category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own BOND.