Municipal debt are seen as a conservative asset since the bonds are backed by tax revenue or fees on critical public services. Additionally, investors also enjoy yields that are typically tax free, which may help augment retirees income. [The Tax Exempt Edge: Why Closed-End Funds Work In Muni Bond ETFs]

Even in a rising rate environment, munis have historically outperformed other bonds when interest rates rose. Additionally, with local finances improving with the broader economy, investors are facing less risks, which “creates a pretty attractive backdrop,” according to David Hammer, executive vice president and municipal bond portfolio manager at Pacific Investment Management Co.

iShares National AMT-Free Muni Bond ETF

For more information on the munis market, visit our municipal bonds category.

Max Chen contributed to this article.