Following the pullback in municipal bonds, muni exchange traded funds could regain traction among income-oriented investors as the Fed extends its accommodative policies.
Muni bond ETFs are beginning to see their first inflows since May, reports Eric Balchunas for Bloomberg.
The iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB), which has a 2.72% 30-day SEC yield, has attracted $52.5 million in assets over the past two weeks, according to IndexUniverse data. [Muni Bond ETFs Look Attractive Compared to Treasuries]
Munis were pummeled earlier this year when rates began rising – bonds have an inverse relationship with yields, so bond prices dip as interest rates increase.
However, a period of prolonged low rates could make muni bond ETFs more attractive as an income play, especially for investors in higher tax brackets – munis essentially come with a tax-equivalent yield of about 5%.