Munis also help diversify fixed-income portfolios. Investors who typically follow the Barclays U.S. Aggregate Bond Index will not have municipal bond exposure, so a muni bond ETF can complement core fixed-income positions.
“The five year range tracked in the S&P AMT-Free Municipal Series Dec 2022 and the ten year range tracked in the S&P AMT-Free Municipal Series Dec 2026 had year-ending yields higher than their U.S. Treasury bond equivalents and when viewed from the perspective of Taxable Equivalent Yield the yields of municipal bonds ended incrementally higher in yield than similar U.S. corporate bonds,” adds S&P Dow Jones.
The municipal market also comes with high quality and low volatility traits. The asset category has experienced lower volatility than other bond categories and tends to be less affected by Federal Reserve rate uncertainty than high-quality taxable investments, like Treasuries.
For more information on the munis market, visit our municipal bonds category.
