Displaying items by tag: fixed income

Actively managed fixed income ETFs have gained remarkable traction, with over $100 billion in inflows in 2024 and growing demand expected for 2025. These ETFs, favored for their flexibility and expertise, have helped the ETF industry surpass $300 billion in fixed income assets this year. 

During VettaFi’s Market Outlook Symposium, 51% of advisors expressed plans to increase their exposure to actively managed funds next year, compared to only 20% for index-based options. 

Core, core-plus, and multi-sector active ETFs, such as Fidelity’s Total Bond ETF (FBND) and iShares’ Flexible Income Active ETF (BINC), have outperformed comparable passive funds. Active ETFs like JPMorgan’s Core Plus Bond ETF (JCPB) balance investment-grade bonds with speculative assets to enhance returns.

Finsum:  With strong performances and growing advisor interest, active fixed income ETFs are poised to remain a dominant force in fixed income investing.

Vanguard has produced two new actively managed municipal bond ETFs aimed at offering competitive tax-exempt income opportunities: the Vanguard Core Tax-Exempt Bond ETF and the Vanguard Short Duration Tax-Exempt Bond ETF. 

These funds target investors looking for diversified municipal bond exposure across credit qualities and regions, with the potential to exceed benchmark performance. Managed by experienced professionals, the Core ETF focuses on high-quality, longer-term bonds, while the Short Duration ETF emphasizes shorter-term bonds with minimal interest rate sensitivity. 

Both funds come with low expense ratios, setting them apart from similar offerings in the market. These launches expand Vanguard's active fixed-income lineup and complement its existing suite of index-based municipal bond funds.

Finsum: With a proven track record in bond fund management, these Vanguard options might work for investors looking to invest in munis. 

As 2025 approaches, municipal bonds and related ETFs present intriguing opportunities for fixed-income investors. Actively managed options, like the ALPS Intermediate Municipal Bond ETF (MNBD), are outperforming some passive counterparts, showcasing the value of active management in this space. 

Experts predict declining muni bond issuance in early 2025, creating a favorable supply backdrop for the asset class. Attractive after-tax yields, such as 6.1% for high tax brackets, are expected to sustain strong demand across mutual funds, ETFs, and managed accounts. 

Goldman Sachs Asset Management anticipates robust technical support for munis, highlighting net supply reductions and compelling credit opportunities. 

Finsum: For investors seeking accessible exposure, ETFs like MNBD simplify participation in the municipal bond market.

Municipal bonds have taken a significant hit after Donald Trump’s election as president, following a sharp selloff in U.S. Treasuries amid concerns over potential deficit-expanding policies and inflationary effects. 

Benchmark municipal yields spiked, echoing the Treasury market’s movements as investors reacted to the likelihood of Trump’s economic plans impacting inflation. Many state and local governments had already rushed to issue bonds before the election, leading to high issuance in October, but new sales were sparse this week. 

Despite the volatility, analysts like Lyle Fitterer of Baird predict bond issuance will recover in time, driven by the U.S.'s substantial infrastructure needs. A Republican victory also stirs concerns that tax cuts could reduce demand for tax-exempt municipal bonds, with JPMorgan analysts highlighting the risk to the tax-exemption status itself. 

Finsum: It’s also worth noting how inflation is going to potentially affect these assets, because there is strong chance inflation will increase under the new regime. 

This week’s muni bond selloff has created a buying opportunity, Wall Street strategists suggest. Following a selloff in U.S. Treasuries, muni yields rose sharply as economic strength tempered hopes for rate cuts. 

Despite a Thursday rally, the 10-year benchmark muni yield remains 26 basis points higher than its start-of-week level, marking one of the year’s steepest weekly declines. JPMorgan strategists see value at current levels, particularly with supportive market conditions anticipated in November. 

The iShares National Muni Bond ETF drew $362 million in inflows on Thursday, helping bolster the market. Barclays strategist Mikhail Foux expects favorable muni performance later this year, though he advises caution until rates stabilize.

Finsum: We think munis might present one of the best options in the bond market as rates begin their descent