At Extreme Investor Network, we believe that municipal bonds offer more than just solid, tax-free income – they could also see some capital appreciation later this year. According to UBS, yields in AAA muni bonds have recently increased due to the strong supply entering the market ahead of the upcoming election. This increase in yield has provided an opportunity for investors to potentially see capital gains in addition to tax-free income.
Municipal bonds are particularly favored by wealthy investors because the interest income is free of federal taxes and may also be free of state taxes for investors residing in the issuing state. With $45 billion of tax-exempt bonds issued in September and continued strong supply in October, now may be a good time for investors to consider adding municipal bonds to their portfolios.
Looking beyond the election, UBS believes that the setup for municipal bonds is constructive for strong year-end performance. The combination of higher yields and an expected decrease in supply post-election could drive prices higher. Furthermore, with the economy on track for sustained growth, the outlook for municipal credit remains positive.
Senior fixed income strategist Sudip Mukherjee recommends focusing on higher-quality munis and likes the 12- to 22-year portion of the curve. He suggests an effective portfolio duration range of six to six-and-a-half years for investors looking to take advantage of the current market conditions.
For investors seeking a diversified approach to municipal bonds, consider an exchange-traded fund (ETF) such as the Vanguard Tax-Exempt Bond Index Fund ETF (VTEB) or Schwab’s Municipal Bond ETF (SCMB). These funds offer attractive yields and low expense ratios, making them a cost-effective option for investors looking to access the municipal bond market.
Stay ahead of the curve with Extreme Investor Network and explore the potential opportunities in municipal bonds for income and capital appreciation. Visit our website for more insights and expert analysis on investing strategies for today’s market.