The Federal Reserve standing pat on interest rates for the time being leaves the window open for fixed income investors to take advantage of current yields. That also includes muni bond exposure, but investors may want to take advantage before that proverbial window shuts.
An Institutional Investor article cited this opportunity in municipal bonds, highlighting the yield the debt is currently offering to the institutional space. Additionally, munis offer a higher degree of quality without taking on more credit risk versus, say, corporate debt, while still maintaining attractive yields. However, yields in the municipal bond market may not stay this appealing for long.
“Muni yields reached 4.72 percent in October — the highest they had been in more than a decade — and have since fallen to 3.91 percent,” the article said. “Still, munis, for now, have relatively attractive yields.”
As the article reiterated, “for now” speaks to the eventual rate cuts by a data-dependent Fed. Once the central bank gets its confirmation, rate cuts will shutter that opportunity window.
ETFTRENDS.COM
by BEN HERNANDEZ
FEBRUARY 15, 2024