Muni bond ETFs see strongest monthly gain in three years

Municipal bonds recorded their strongest monthly return in three years in October, with the Bloomberg Municipal Bond Index rising 3.62%. The surge was driven by a sharp drop in new supply and resilient investor demand, which allowed cash-heavy buyers to clear available paper quickly.

Yields on benchmark two-year and 10-year municipal bonds fell by seven and eight basis points, respectively, as the Federal Reserve held interest rates steady. While broad investment-grade municipal indices posted mild losses year-to-date, high-yield municipal bonds advanced 1.67%, offering a taxable-equivalent yield of 8.16% for top-bracket taxpayers on the 30-year end of the curve.

Financial advisors are increasingly turning to high-yield municipal bond ETFs to capture these premiums. Actively managed and passive funds in this sector provide tax-exempt income without corporate default exposure, allowing investors to lock in yields before new supply is expected to rebound.

Read the full story at etfdb.com.