Consequently, investors should expect the low supply of new municipal bonds to persist.
“Only a change in attitudes and a reprioritization of spending on infrastructure, and investing for the future is likely to increase issuance,” Kozlik added. “These are tremendous barriers to overcome without a crisis or other incentives.”
Municipal bond ETFs have been strengthening this year on the lower supply in new issuance and could find further support if states keep cutting back on spending. The iShares S&P National AMT-Free Muni Bond ETF (NYSEArca: MUB) has increased about 6.0% year-to-date. MUB has a 6.06 year duration and a 30-day SEC yield of 1.88%, or a taxable equivalent 3.32% 30-day SEC yield. [Monitor Your Muni ETF’s State, Credit Risk Exposure]
iShares S&P National AMT-Free Muni Bond ETF
For more information on the munis market, visit our municipal bonds category.
Max Chen contributed to this article.