Municipal bonds are not exactly the most exciting part of the market. Most investors usually only think of them when there is a crisis or high-profile downgrade.

Yet, in today’s environment it makes sense why there is renewed interest in the category. They are one way that investors can take advantage of higher rates, but they also provide a greater degree of safety given that default risk is much lower.

Todd Rosenblum discusses why the successful resolution of the debt ceiling could be a catalyst for further gains in a blog post for ETFTrends. Prior to the resolution, there was a surge of demand for Treasuries as investors were looking to de-risk their portfolios. 

Now, there is outflow from Treasuries and expectations of more weakness given strength in equity markets and increased supply coming online over the next few months. Thus, there is a rotation into other types of fixed income products. 

Municipal bonds are one recipient of these outflows especially as they offer tax benefits. Investors also can buy a municipal bond ETF which is a diversified, low-cost way to get exposure to the asset class. 

Finsum: Municipal bonds are one way that investors can take advantage of high yields, while also offering tax benefits. They are seeing renewed interest following the debt ceiling resolution.