Top Reasons to Consider Municipal Bonds

Why Munis, Why Now?

Municipal bonds are funds borrowed by state and local governments and nonprofits to usually build buildings from airports to schools to hospitals to toll roads. It's a very tangible asset class. The projects that municipal bonds support affect our everyday life.

In times of volatility, municipal bonds are a safe haven, not just from taxes, but from default concerns. Currently the stock market is very volatile, there's a lot of concerns about federal deficits, tax rates, and municipal bonds have proven to withstand economic instability and uncertainty. We're not seeing an increase in defaults. We continue to see revenue streams reliably performing satisfactorily in order to pay debt service.

The Case for Munis in Today’s Market

Municipal bonds offer tax-exempt income and safety. And we're seeing now when other markets show more volatility, municipal bonds continue to be stable.

While municipal bonds have underperformed in the first half of the year, we do expect improved performance over the second half of the year.

During the first half of the year, there was significant concern over some municipal bonds losing their tax exemption. We've seen that wane. That's going to add to performance as well as, we continue to see more upgrades than downgrades in the investment grade sectors and more increased confidence in the stability of these revenue streams.

We're seeing records supply this year in the municipal market, which only improves liquidity across the space. Despite economic volatility, the municipal bond default rate continues to remain very low.

Overview of VanEck’s Muni ETF Suite

What's unique about the VanEck municipal suite is that whether you're looking for high yield or investment grade opportunities, the products are nuanced in order to really focus on the duration needs.

So for example, for short duration, whether in high yield or investment grade, there are opportunities to put your money to work. All of our funds offer geographic and sector diversity with our investment grade funds focusing on cities, school districts, airports, water and sewer systems, toll roads. They're all of the capital projects that you see around you in your town and state.

While all of the VanEck municipal products offer diversity, what I really love about them is that they allow for investors to really hone in on their maturity buckets that they're interested in and really help them meet their duration goals.

This is particularly important for investment grade municipal bonds because they often follow the treasuries. So if an investor's opinion is changing on where they think duration is, it's easier for them to move from one fund of ours to the other so that their investments better reflect their new opinions.

As we continue to see the volatility in the markets right now, munis are looking more and more attractive as a safe place to invest with tax-free yields.

For more information on the muni suite and other income investments please look at the income investing playbook, which is linked in the description of this video.