ETF offerings in the muni bond market include the iShares National Municipal Bond ETF (NYSEArca: MUB), SPDR Nuveen Bloomberg Barclays ST Municipal Bond ETF (NYSEArca: SHM) and the Vanguard Tax-Exempt Bond ETF (NYSEArca: VTEB).
Foreign Investment Interest
While the majority of fund flows into fixed-income ETFs went into aggregate bond funds and government debt, foreign investment into municipal bonds saw an uptick, Dizard noted. It’s a play that U.S. investors should also take note off as more money flows out of riskier bond funds like high yield, which saw over $2.4 billion in outflows during the month of December.
“In recent years, though, the draining away of fixed-income yield around the world has made US munis attractive to foreigners, who are now among the major suppliers of new money to the market,” Dizard wrote. “As one opportunistic American muni investor points out: ‘The average 30-year muni bond now pays 105 per cent of the yield of the 30-year US Treasury. And unlike Treasuries, most of those munis can be called after 10 years. It is one of the best fixed-income opportunities in the world.'”
For more trends in fixed income, visit the Rising Rates Channel.