Manage Volatility, Generate Income with Muni Bond ETFs

Lastly, munis provide portfolio diversification and hedge against equity risk. Bonds are showing diverging correlations to equity risk. Moreover, the asset may offer a hedge against other risks that could affect investment portfolios this year, including ongoing China economic concerns and volatile oil prices.


“While the recent equity market volatility and related investor flight to quality has benefited Treasuries most, we believe that has created an opportunity in municipal bonds,” Hayes added. “Any further underperformance relative to Treasuries, along with potential weakness around tax time, would present an attractive entry point into the tax-exempt asset class.”

ETF investors interested in the munis market have a number of options available. For investment-grade muni exposure, the iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB) has a 4.69 year duration and a 1.32% 30-day SEC yield, SPDR Nuveen Barclays Municipal Bond ETF (NYSEArca: TFI) has a 6.78 year duration and a 1.54% 30-day SEC yield, VanEck Vectors Intermediate Municipal Index ETF (NYSEArca: ITM) has a 6.59 year duration and a 1.61% 30-day SEC yield.

Related: 33 Muni Bond ETFs to Augment Income Generation

Additionally, muni investors can also squeeze out greater returns through high-yield options, like the VanEck Vectors High Yield Municipal Index ETF (NYSEArca: HYD) and SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSEArca: HYMB). HYD has a 3.98% 30-day SEC yield and a 8.62 year duration. HYMB has a 3.73% 30-day SEC yield and a 7.36 year duration.

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