Investors, concerned over a cutback in Fed quantitative easing and higher rates, have been shifting away from municipal bond exchange traded funds, but the move may have been premature.
The triple-A rated 10-year muni benchmark was hovering around 2.27% last Thursday, or up 46 basis points month-over-month, reports Ben Eisen for MarketWatch. [Muni Bond ETFs Slip on Rate Concerns]
Municipal bond investors have redeemed $1.47 billion from bond funds in the week ended June 12, with retail investors driving most of the trades.
According to alternative-trading platform TMC Bonds LLC, the daily average muni bond trades is up 28.2% year-to-date, but trade sizes were down 21.2%. Last month, as talks about a Fed “tapering” gained momentum, average trades increased 35.2% while trade sizes were 23.1% smaller. So far in June, average trades are up 40.8%.
However, the recent plunge in munis may have been an overreaction.