This month’s panic-driven selling across municipal bonds — fueled by the boom in ETFs — is proving a mixed blessing for investors in a normally sedate market corner.
As the tariff-spurred turmoil erupted in recent weeks, money managers navigated the immense selling pressure via exchange-traded funds, which lived up to their billing as efficient vehicles for price discovery. That’s a boon in an asset class where some securities can go months without trading.
At the same time, that ease of trading also contributed to the biggest three-day drop for munis since the pandemic, with ETFs accounting for more than 40% of the $3.3 billion in outflows from the market for local and state government debt in the week ended April 9, according to LSEG Lipper Global Fund Flows.
Bloomberg Markets
By Erin Hudson and Shruti Singh
April 17, 2025