Where could fixed income investors potentially get the yields they’ve been accustomed to over the last few years while maintaining strong credit fundamentals? One place could be muni bonds, via one fund: the Fidelity Municipal Bond Opportunities ETF (FMUB).
Because of the complexities associated with munis, FMUB presents an ideal alternative because of its active management. Fidelity’s portfolio managers can exercise autonomy to adjust the fund’s holdings to capture upside, protect from the downside, or in the case of fixed income, maximize yield. As noted by Morningstar, the flexibility of active management was apparent in the performance of muni funds.
“While the muni-national long category faced headwinds this year overall, that trend shifted in September,” noted Morningstar, highlighting the performance of two mutual funds in the Fidelity Municipal Income FHIGX and Fidelity Tax-Free Bond FTABX.
Both funds fared well even during 2022, where both stocks and bonds were falling in concert due to rising interest rates. Likewise, they were also strong performers over long-term, trailing 5- and 10-year periods through the end of August 2025.
“Many strategies in that category are managed by skilled teams using advanced tools and have consistently outperformed category peers in both strong and difficult muni markets,” Morningstar added.
Those same strategies are employed in FMUB, but with the cost-effectiveness, tax-efficiency, and intraday trading flexibility of an ETF.
Potential Muni Advantages for Investors
When it comes to assessing credit quality, munis are generally situated between corporate bonds and safe haven Treasuries. The credit fundamentals of munis have improved over the past few years. This makes them an ideal option for those looking to balance credit risk and yield. The majority of FMUB’s holdings reside in investment-grade debt to further stress quality in an uncertain market environment. However, it can dip into lower-quality debt securities in order to extract further yield.
Of course, the primary feature investors are attracted to munis is their tax-free income at the federal level. Meanwhile certain state-issued bonds can also provide tax-free income benefits in the case of state-specific funds. Furthermore, with a next expense ratio of just 30 basis points, the active FMUB makes it a compelling option among its appears according to the FactSet segment average.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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