The easy to access intra-day liquidity for muni ETFs has attracted a variety of market participants who are not active in the underlying over-the-counter market for individual bonds. As a result, fluctuations in investor demand may not have as much of an effect on the volume of ETF trading as it may in the cash market.

Post Disclosure

Patrick Luby is a Fixed Income Portfolio Strategy Specialist and the author of He has been helping many of the industry’s best advisors and their investor clients understand and navigate the municipal bond market since the weekly Bond Buyer Municipal Bond Index was at 9.48%.

This is not a recommendation to buy, sell or hold any of the securities or strategies mentioned. The author does not provide investment, tax, legal or accounting advice. Investors should consult with their own advisor and fully understand their own situation when considering changes to their strategy, tactics or individual investments.

The Bond Buyer Municipal Bond Index is based on prices for 40 long-term municipal bonds. The index is calculated by taking price estimates from Standard & Poor’s Securities Evaluations for the 40 bonds, converting them to fit a standard 6% coupon, averaging the converted prices, and multiplying the result by a smoothing coefficient that compensates for the changes made twice a month in the index’s composition.