The One Big Beautiful Bill Act (OBBBA) contains a plethora of tax alterations that advisors and clients should be aware of. The tax advantages offered by municipal bonds remain in place. However, some of the changes could also make municipal debt and ETFs such as the PIMCO Intermediate Municipal Bond Active Exchange-Traded Fund (MUNI) even more appealing. This is good news for income-seeking clients and retirees.
MUNI attempts to beat the Bloomberg 1-15 Year Municipal Bond Index with holdings that are primarily short- and intermediate-term bonds. Currently, it has 576 holdings with an average effective duration of 4.79 years. The $2.74 billion ETF debuted in 2009. Its status as an actively managed fund could be compelling the current tax climate.
“Municipal bonds as an asset class is a little bit of a funny class compared to other types of classes,” noted Devin Ekberg of PIMCO’s advisor education group. “There’s a lot of inefficiencies and dislocations, last year in particular. In 2025, there was a lot of structural issues, a lot of supply that met the market, and it caused a lot of disruption in price and so forth. Unfortunately, that’s a very difficult environment for passive bond managers to handle.”
MUNI Ready to Shine
With the array of federal and state tax benefits offered by the asset class, muni bonds and ETFs are often viewed as appropriate for affluent investors, particularly those living in high-tax states. However, thanks in part to OBBBA, the audience is potentially wider for these bonds. Investors in some of the marginal tax brackets can also leverage the perks offered by munis.
PIMCO’s Ekberg pointed out how advisors can use them to pare clients’ taxable income and also benefit from the uncommon yield advantages to be had today.
“Reducing taxable income in that manner can be a big advantage,” he said. “And then finally, on top of that, you may also be helping preserve valuable tax deductions for certain taxpayers. Things like the bonus senior deduction for your clients that are age 65 and older. If they’re married filing jointly, it’s an additional $12,000 bonus deduction that they can take. We help preserve that with their income.”
Speaking of yield, MUNI sports a 30-day SEC yield of 3.05%. The PIMCO ETF’s annual expense ratio is 0.35%, or $35 on a $10,000 investment.
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