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Now’s Not The Time to Abandon Municipal Bonds

BY | ETF Database
7:45 am ET 10/21/26 | 25 VIEWS
Treasuries are far from the only offenders when it comes to currently elevated bond yields. Typically docile, at least in yield terms, municipal bonds are also guests at this dubious party.For example, the ALPS BBH Intermediate Municipal Bond ETF (MNBD B-) sported a 30-day SEC yield of 3.79% as of Sept. 30. That’s not alarmingly high. But it’s high enough to confirm that munis are being plagued by goings-on in the Treasury market. Put it all together and some investors may be skittish about municipal bonds and ETFs such as MNBD. They may want to embrace the opposite school of thinking. That’s because now might be the ideal time to consider municipal debt. And specific to MNBD, the ETF is actively managed. That indicates it can better manage rate risk than passively managed rivals.MNBD Has PerksWhile not a high-octane asset class by any stretch, municipal bonds offer an array of benefits that cement the thesis for MNBD, even with today’s high yields. “Unlike stocks, individual investment grade municipal bonds will return your full initial investment (principal) when they mature (or called), regardless of intermediate price drop (subject to the rare possibility of default),” according to Raymond James. “Regular, tax-efficient interest payments (coupons) remain exactly the same as the purchase date. Higher current interest rates allow investors to buy new bonds at a discount, locking in better long-term income.” As it relates to MNBD, another point to consider is that declining bond prices, as unnerving as they are, aren’t “death knells.” “But unlike equities that decline in price - with no certainty about what the future holds - bonds that decline in price due to increases in interest rates have a brighter future,” added Raymond James. “Bonds that are now priced at a “discount” (below par) will increase over time, moving back to par ($100) as they approach maturity (or call).” Broadly speaking, states’ financial houses are in order. That indicates potential advantages with MNBD’s 84.37% tilt to revenue bonds. Overall, patient investors who look beyond the municipal bond surface today may be rewarded over the long term. “As year-end approaches, it’s a good time to have a conversation with your financial advisor,” concluded Raymond James. “You may be seeing red today, but you will be back in the black in the future - even if you have to wait to maturity (or call). Now’s the time to lock in even more reliable, tax-efficient income at rates that don’t come along every day!” For more news, information, and analysis, visit the ETF Building Blocks Content Hub.

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