“When investors take a step back and the panic comes out of their emotions, and you apply a 39.6% federal tax rate to some of the yields on munis right now, you forget how attractive they are,” said Matt Dalton of Belle Haven Investments in the Bloomberg story.
The increase in the top marginal income tax rate to 39.6% from 35% in the fiscal cliff compromise “may make municipal bonds even more attractive to some high income investors,” says Morningstar analyst Timothy Strauts in a profile of MUB, the largest muni bond ETF.
“In general municipal-bond funds are most suitable for use in taxable accounts by investors in high tax brackets,” he notes. “The reason is that interest income from municipal bonds is tax-exempt at the federal level.”
iShares National AMT-Free Muni Bond ETF
