The appetite for bonds has definitely reached a fervent pace amid the volatility thanks to the coronavirus outbreak. One area of the bond market that’s seeing a feeding frenzy is municipal bonds, even with yields at record lows.

You would think safe-haven debt like the 10-year Treasury yield falling below 0.5% would discourage investors from bonds, but that hasn’t been the case. Allocation to safe-haven assets has trumped the need for yield for certain fixed income investors.

“Taking a look at the monthly statement in municipals, your manager is talking about basis points,” said Greg Fazakerley, a 72-year-old real estate developer, via an LA Times report. “We kind of chuckle over a cup of coffee. That’s not where we’re squeezing the lemon to get more juice.”

US Municipal Bond ETF Net Issuance Chart

US Municipal Bond ETF Net Issuance data by YCharts

Investors looking to get in on municipal bonds can give the following funds a look:

  1. VanEck Vectors AMT-Free Long Municipal Index ETF (BATS: MLN): 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 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): seeks investment results that correspond generally to the performance, before fees and expenses, of the Solactive Municipal Infrastructure Revenue Bond 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):  seeks a high level of current income that is exempt from federal income taxes. 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.
  4. SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSEArca: HYMB). HYMB seeks to provide investment results that correspond generally to the price and yield performance of the Bloomberg Barclays Municipal Yield Index. It invests a majority of its total assets in the securities comprising the index and in securities that the Sub-Adviser determines have economic characteristics that are substantially identical to the economic characteristics of the securities that comprise the index. The index measures the performance of USD-denominated high-yield municipal bonds issued by U.S. states, the District of Columbia, U.S. territories and local governments or agencies.

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