Amid elevated interest rate risk and escalating concerns about states’ pension and retiree health obligations, 2013 has been a rough year for municipal bond investors. Losing streaks for some muni bond ETFs have stretched into months and investors have not been shy about pulling cash from these funds.

In the first nine months of 2013, U.S. municipal bond exchange-traded products have experienced a collective outflow of over $700 million, with nearly $300 million of this occurring in September, according to BlackRock data. Concerns regarding Puerto Rico’s fiscal position have also pressured muni bond funds in recent weeks.

“While the situation in Puerto Rico is certainly worth watching, there remain reasons for optimism in the

broad municipal bond ETF market, in our view. For one, all 50 states have investment-grade credit ratings from Standard & Poor’s Ratings Services, with 13 of them having AAA ratings,” said S&P Capital IQ in a new research note.

While all is not lost for all muni bond ETFs, the outlook is far from sanguine for the entire group. The iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB), the largest muni bond ETF by assets, has an effective duration of 7.2 years, making it vulnerable to rising rates. [Muni Bond ETFs Slip on Rate Concerns]

S&P Capital IQ has marketweight rating on MUB. While MUB has lost assets (nearly $400 million) since interest rates started spiking in May, investors have not altogether departed muni ETFs. The SPDR Nuveen Barclays Short Term Municipal Bond ETF (NYSEArca: SHM) has attracted $100 million in new assets since May, according to S&P Capital IQ.