After lagging last year, high yield municipal bonds have bounced back, and the case for them looks strong. Starting yields sit near their most attractive levels in more than a decade, and for investors in higher tax brackets the tax equivalent income can rival or beat many taxable sectors. Supply has been steady rather than flooded, demand from wealthy investors and institutions remains healthy, and credit fundamentals look solid, with defaults running well below similarly rated corporate bonds. Many issuers fund essential projects such as hospitals, utilities and transportation. The sector is not for the faint of heart, though. Returns hinge on individual issuers, liquidity can be thin and many bonds are unrated, so careful, bottom-up credit research is key. For investors who want tax advantaged income with extra yield, high yield munis deserve a look. 

Finsum: Extra yield always comes with extra homework, so investors chasing high yield munis should lean on skilled credit selection and keep the position sized for the bumps.