Municipal Bond ETF
Municipal bonds are issued by states, cities, local governments or local government entities such as school districts and interest income is often tax exempt. Generally speaking, municipal bonds are safer than corporate bonds, but riskier than US treasury bonds, so offer middle of the road yields. However, at this time it seems that the yield difference in muni bonds isn’t great enough to account for the increased risk. You can can get longer term treasury bond yields about in line with most of the muni bond yields (as of June 2010). Below is a list of the most liquid diversified municipal bond ETF’s and their yields.
iShares S&P National Municipal Bond Fund (MUB) 3.6%
SPDR Barclays Capital Municipal Bond ETF (TFI) 3.7%
SPDR Barclays Capital Short Term Municipal Bond ETF (SHM) 1.9%
PowerShares Insured National Municipal Bond Portfolio ETF (PZA) 4.75%
PowerShares VRDO Tax-Free Weekly Portfolio ETF (PVI) .70%
PowerShares Build America Bond Portfolio ETF (BAB) 5.8%
Market Vectors Intermediate Municipal Index ETF (ITM) 3.5%
Note: there are closed end fund that provide municipal bond ETF exposure within several states. See the full list here.
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