ETF Trends
ETF Trends

Municipal debt yields are back to a half-century low, but muni bond exchange traded fund investors have not been dissuaded by the prospect of ultra-low payouts.

Yields for muni debt securities are back to their lowest level since 1965 as a rally in safe-haven assets bolstered demand, reports Brian Chappatta for Bloomberg.

The yield on a Bond Buyer index of 20-year municipal general-obligation bonds dipped to 3.27% last week, mirroring rates in December 2012 and the lowest since 1965. Yields on top-rated 10-year munis were also at 1.6%, just above the lows hit in late 2012.

Looking at muni ETF yields, the intermediate-term iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB) has a 1.34% 30-day SEC yield, SPDR Nuveen Barclays Municipal Bond ETF (NYSEArca: TFI) has a 1.63% 30-day SEC yield, Market Vectors Intermediate Municipal Index ETF (NYSEArca: ITM) has a 1.66% 30-day SEC yield and Vanguard Tax-Exempt Bond Index Fund (NYSEArca: VTEB) has a 1.53% 30-day SEC yield.

As yields fallen off, munis have been outperforming. Year-to-date, MUB rose 1.3%, TFI gained 2.0%, ITM increased 2.2% and VTEB advanced 1.2%.

ETF investors have kept piling into munis, despite the pricey valuations. Year-to-date, MUB has attracted $155.7 million in net inflows, TFI added $79.0 million, ITM saw $21.7 million in inflows and VTEB brought in $61.5 million, according to

Money managers aren’t letting up either. BlackRock Inc., Nuveen Asset Management and Vanguard Group Inc., which make up a combined 10% of the $3.7 trillion municipal market, plan to keep acquiring muni positions and avoid betting on the direction of interest rate moves.

“Calling rates is not easy — you have a flight to quality going on, and trying to call that turning point is oftentimes difficult,” Chris Alwine, head of muni funds at Vanguard, told Bloomberg. “That’s really the debate going on in munis right now: You’re dealing with macro forces that are forcing rates lower, and then muni factors indicate there’s some vulnerability in the market. When we put that all together, we’re positioned more neutrally.”

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.