Even with the threat of negative yields and inverted yield curves, most analysts will agree that it’s still necessary for investors to have core bond exposure in their portfolios. However, advisors can also suggest capital allocations to other areas of the bond markets where more substantial returns can be realized like the municipal bond markets via the top-performing muni-focused exchange-traded funds (ETFs).

Per a U.S. News report, “Despite the yield curve inversion in two- and 10-year Treasury bonds, there are plenty of opportunities for investors to earn stable yield, including municipal bonds, experts say. Municipal bonds, in general, are performing well, supported by favorable supply and demand dynamics, and it’s expected to continue.”

Where do investors start when they want this municipal bond exposure? Here are the three top-performing ETFs year-to-date to get going:

  1. VanEck Vectors AMT-Free Long Municipal Index ETF (BATS: MLN)–up 11.07 percent YTD: seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Bloomberg Barclays AMT-Free Long Continuous Municipal Index. The fund normally invests at least 80% of its total assets in fixed income securities that comprise the index. The index is comprised of publicly traded municipal bonds that cover the U.S. dollar denominated long-term tax-exempt bond market.
  2. Xtrackers Municipal Infrastructure Revenue Bond ETF (NYSEArca: RVNU)–up 10.28 percent: seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive Municipal Infrastructure Revenue Bond Index (the “underlying index”). The fund will invest at least 80% of its total assets (but typically far more) in instruments that comprise the underlying index. The underlying index is comprised of tax-exempt municipal securities issued by states, cities, counties, districts, their respective agencies, and other tax-exempt issuers.
  3. Franklin Liberty Municipal Bond ETF (NYSEArca: FLMB)–up 9.74 percent:  seeks a high level of current income that is exempt from federal income taxes. Under normal market conditions, the fund invests at least 80% of its net assets in municipal securities whose interest is free from federal income taxes, including the federal alternative minimum tax. Although the fund tries to invest all of its assets in tax-free securities, it is possible that up to 20% of the fund’s net assets may be in securities that pay interest that may be subject to the federal alternative minimum tax and, although not anticipated, in securities that pay interest subject to other federal or state income taxes.

For more market trends, visit ETF Trends.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.