Key Muni Bond ETF Up 10% This Year Despite Default Warning

By Morningstar: By Timothy Strauts

By John Spence: An exchange traded fund that invests in municipal bonds is on a five-day winning streak amid reports that supply is tight in this area of the fixed income market.The iShares S&P National AMT-Free Municipal Bond Fund (NYSEArca: MUB) has rallied nearly 3% over the past week.

Shishir Nigam submits: PIMCO’s Intermediate Municipal Bond Strategy Fund (MUNI) turns one today, having been launched on November 30th, 2009 a year ago.

Michael Johnston submits:As investors have become more comfortable with the idea of achieving fixed income exposure through the exchange-traded structure, bond ETF assets have skyrocketed and the number of funds has increased rapidly. For those in higher tax brackets, municipal bonds have always been a popular option, as the tax-exempt feature of the interest payment boosts the tax-equivalent yield realized.

By Tom Lydon: The largest U.S.-listed municipal bond exchange traded fund has started trading at a discount to its net asset value for the first time in five months.

By Tom Lydon: Bond default rates among cities and state municipalities are on the rise, but municipal bond exchange traded funds remain relatively unfazed as investors continue to search for yield producing assets. The iShares S&P National Municipal Bond Fund (MUB) is in positive territory for 2012. MUB has an expense ratio of 0.25% and a 3.11% yield.

Tom Lydon submits: By John Spence Exchange traded funds that invest in municipal bonds have regained their footing in 2011 after a nasty plunge late last year. Noted analyst Meredith Whitney touched off a firestorm last year when she told “60 Minutes” that she foresaw hundreds of billions of dollars of defaults in the muni bond market. She appeared on CNBC on Wednesday morning to defend that call. “I know I’m right on this,” Whitney said in the extended television interview.

By Tom Lydon: Municipal bond exchange traded funds have been drawing unusually high inflows as the fixed-income asset hovers around a supporting level. For instance, the iShares S&P National AMT-Free Muni Bonds Fund (MUB) is experiencing volume around 300,000 shares daily, whereas it has averaged 187,000 shares, according to Morningstar data. MUB has a distribution yield of 3.3%.