Muni ETFs: No Summer Vacation

June 08, 2017

High Levels Of ETF Trading Activity
While they have continued to attract new assets (up $1.7 billion, year-to-date as of 6/2/17), most of the activity in muni ETFs has been in trading, with the ratio of dollar volume traded to net flows at more than 13:1 ($22.8 billion traded to $1.7 billion in new assets, as of 6/2/17 according to FactSet). The bulk of trading is concentrated in the largest ETFs, however, with the top 10 funds claiming 89% of the year-to-date trading volume.

Overall, the muni market has put up strong total returns so far this year. Perhaps most notable is the strong performance of the taxable municipal bond index, up 4.6% year-to-date after being up 5.7% last year.

On a related note, effective June 1, BAB changed its name and underlying index. Formerly the PowerShares Build America Bond Portfolio and tracking the BofA Merrill Lynch Build America Bond Index, the fund is now the PowerShares Taxable Municipal Bond Portfolio and tracks a broader index, the BofA Merrill Lynch US Taxable Municipal Securities Plus Index. The change allows the index (and the fund) to provide access to a larger number of securities. 


Muni ETFs

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Muni ETFs can be used as the primary source of exposure to the muni market or can be added to an existing portfolio of individual bonds. For example, investors with matured or called bond proceeds may wish to use muni ETFs as “placeholders” to maintain an appropriate fixed-income allocation while waiting to reinvest in individual bonds. Or, they can be used to adjust the overall portfolio risk characteristics without having to sell bonds; for example, by adding short-duration ETFs to offset longer-duration bonds. 

Patrick Luby is the Municipal Strategist with CreditSights Wealth. For more information or feedback, please contact: [email protected] or call us at 212-340-3898 or 1-800-460-3320. This article is not intended as an offer or solicitation with respect to the purchase or sale of any security or as personalized investment advice. CreditSights Wealth publishes investment research but does not recommend the purchase or sale of financial products or securities, and does not give personalized financial or investment advice. Recommendations made in a report may not be suitable for all investors. See Important Disclosures at


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