Top Reasons to Consider Municipal Bonds
June 27, 2025
Watch Time 3:36 MIN
Municipal bonds continue to stand out as a safe haven in today’s volatile market, offering tax-exempt benefits and stability. Steady revenue streams and fading concerns over municipal bonds’ tax exemption status are setting the stage for a strong second half of the year. Learn how to gain diversified exposure across sectors and geographies, with tailored options to meet investors’ specific duration goals.
To read the full blog, visit: https://www.vaneck.com/us/en/blogs/income-investing/income-investing-playbook/
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.
IMPORTANT DISCLOSURE
Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this video.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer duration fixed-income securities and during periods when prevailing interest rates are low or negative.
Investments in below-investment-grade debt securities which are usually called “high-yield” or “junk bonds,” are typically in weaker financial health and such securities can be harder to value and sell and their prices can be more volatile than more highly rated securities. While these securities generally have higher rates of interest, they also involve greater risk of default than do securities of a higher-quality rating.
An investment in the Funds may be subject to risks which include, but are not limited to, risks related to municipal securities, high yield securities, credit, interest rate, state, call, private activity bonds, industrial development bond, special tax bond, market, operational, sampling, index tracking, tax, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares and concentration risks, all of which may adversely affect the Funds. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds. A portion of the dividends you receive may be subject to the federal alternative minimum tax (AMT). There is no guarantee that the Funds’ income will be exempt from federal, state or local income taxes, and changes in those tax rates or in alternative minimum tax rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Capital gains, if any, are subject to capital gains tax.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Associates Corporation.
© 2025 Van Eck Associates Corporation.
666 Third Avenue, New York, NY 10017
