NEW YORK: The two largest municipal bond exchange-traded funds (ETF) just recorded their largest weekly inflows ever, shortly after a bond rout fuelled outflows in other muni funds.
Last week, BlackRock Inc’s US$46bil iShares National Muni Bond ETF attracted about US$1.2bil, while the US$47bil Vanguard Tax-Exempt Bond Index ETF saw US$1.7bil in inflows.
An attractive yield environment is likely behind the interest in muni funds, according to Nathan Will, Vanguard Group’s head of municipal credit research.
Yields have jumped, and for many investors, it’s hard to find tax-equivalent yields elsewhere in other fixed income markets, he said. Valuations have also become more attractive relative to taxable bonds.
“Against that backdrop, investors may be viewing periods of market volatility as an opportunity to add exposure to a high-quality, tax-advantaged asset class,” Will said.
On Monday, 10-year benchmark muni yields climbed to their highest since April 2025, and earlier this month, 30-year benchmark yields hit their highest since 2011, as rising Treasury rates and heavy new issuance pressured the market.
Chris Brigati, chief investment officer at SWBC Investment Services, said the demand could be attributed to tax-loss harvesting. — Bloomberg
