Groups Fight to Preserve Tax-Exempt Status of Municipal BondsETF Trends is now VettaFi. Read More --For what municipal bonds lack in terms of exciting return profiles, the asset class makes up for with other advantages. Those include low volatility, reliable income and a variety of tax advantages that make these bonds appealing to retirees and high-net-worth investors. This is particularly true for those living in states with elevated tax burdens.The issue with tax advantages is that existence of those bene ...

Core Insights - Municipal bonds are experiencing a resurgence, driven by investor enthusiasm following the Federal Reserve's rate cut and favorable economic indicators [4][6] - The ALPS Intermediate Municipal Bond ETF (MNBD) is positioned to benefit from this trend, with increasing inflows and attractive tax-equivalent yields compared to Treasuries [2][4][6] Group 1: Market Conditions - Concerns about the U.S. economy and new issuances have affected municipal bonds, but they ended the previous year with positive momentum [1] - The Federal Reserve's first rate cut in September 2025 has sparked renewed interest in bonds, leading to significant inflows into fixed-income funds [4] Group 2: Investment Opportunities - The active management of MNBD aligns with the growing preference for tax-advantaged income-generating assets among investors [2][3] - The passage of the Big Beautiful Bill, which preserved tax exemptions, has further enhanced the attractiveness of municipal bonds [4] Group 3: Future Outlook - With expected slowing in new issuances and increasingly attractive valuations, municipal bonds are likely to maintain their momentum into 2026 [6] - Active management strategies in ETFs like MNBD could position them as leaders in the anticipated resurgence of municipal bond investments [6]

Core Insights - Taxes are a significant financial burden for workers, impacting both wages and investment gains. However, with strategic planning, individuals can reduce or eliminate taxes in retirement through specific income sources. Group 1: Tax-Free Retirement Income Sources - Roth account withdrawals allow for tax-free growth and withdrawals, providing financial flexibility in retirement and protection against potential future tax rate increases [3][4]. - Health Savings Accounts (HSAs) offer pre-tax contributions, tax-free investment gains, and tax-free withdrawals for qualifying healthcare expenses, with additional flexibility after age 65 [5][7]. - Municipal bonds provide stable investment returns with federally tax-exempt interest, making them a reliable source of income in retirement [8].

Core Insights - The rise in interest rates since March 2022 has made income-oriented assets more attractive for investors seeking reasonable yields from their investments [1][2] - A diversified portfolio that includes various income-generating assets is recommended over investing in a single product or security [1] - The current high-interest rate environment allows investors to earn passive income more easily than in the past decade [2] Investment Options - **Money Market Funds**: Yields have increased to around 5%, making them a compelling low-risk income option compared to previous yields close to 0% [3] - **Municipal Bonds**: These are tax-efficient investments typically not subject to federal taxes, but investors should evaluate credit ratings and maturities [4] - **Certificates of Deposit (CDs)**: Popular due to rising rates, but investors should align maturity dates with their cash needs to avoid penalties for early withdrawals [5][6] - **Dividend Stocks**: The S&P 500 High Dividend Index offers yields over 5%, providing both income and potential for appreciation, which helps maintain purchasing power [7] - **Other Options**: Additional income-generating assets include Treasuries, high-yield bonds, master limited partnerships (MLPs), and real estate investment trusts (REITs) [8] Tax Considerations - Different investment options have varying tax treatments, impacting overall returns. Fixed-income securities are taxed at ordinary income rates, while dividends and capital gains have different tax implications [10][11] - Understanding the tax treatment of assets is crucial for determining the appropriate account type for holding these investments [11] - A holistic approach to asset allocation can help mitigate taxes, and consulting with a tax advisor is recommended for personalized strategies [12]

Core Insights - The Fidelity Municipal Bond Opportunities ETF (FMUB) is highlighted as a potential source of yields for fixed income investors while maintaining strong credit fundamentals [1] - FMUB benefits from active management, allowing portfolio managers to adjust holdings to optimize yield and mitigate risks [2] - The performance of FMUB and its related mutual funds has shown resilience even during challenging market conditions, particularly in 2022 [3] Performance and Management - The muni-national long category faced challenges, but performance improved in September, with FMUB and its mutual fund counterparts demonstrating strong results [3] - Skilled management teams using advanced tools have consistently outperformed peers in both favorable and adverse muni markets, a strategy reflected in FMUB [4] Credit Quality and Yield - Munis are positioned between corporate bonds and Treasuries in terms of credit quality, with improved fundamentals making them attractive for balancing credit risk and yield [5] - FMUB primarily holds investment-grade debt but can include lower-quality securities to enhance yield [5] Tax Benefits and Cost Efficiency - The primary attraction of munis is their tax-free income at the federal level, with some state-specific bonds also offering tax advantages [6] - FMUB has a low expense ratio of 30 basis points, making it a cost-effective option among its peers [6]

Group 1 - Rising healthcare costs are a significant concern for retirees, as they tend to increase at a faster rate than general inflation, necessitating careful financial planning for medical expenses [3][4] - Contributing to a health savings account (HSA) during working years can be beneficial, as funds can grow tax-free and be used for medical expenses in retirement [4] - Choosing Medicare coverage wisely each year is crucial, as health needs change and exploring different plans can lead to better coverage and cost savings [5] Group 2 - Taxes will impact retirees' income, and future tax rates are uncertain, making it important to consider saving in a Roth account for tax-free gains and withdrawals [6] - Municipal bonds are highlighted as a tax-friendly investment option for generating retirement income, as their interest is exempt from federal taxes and potentially state and local taxes [8]

Core Insights - Investors are increasingly focused on generating cash flows, long-term growth, and tax-efficient investments that can provide significant tax savings over time [1] Group 1: Tax-Efficient Investment Strategies - The IRS offers upfront tax write-offs to encourage capital flow into specific sectors, potentially leading to savings worth six or seven figures depending on income and investment size [1] - Strategic addition of tax-efficient asset classes can enhance financial growth [2] Group 2: Investment Property (1031 Exchange) - Real estate is a tax-advantaged asset class, with primary residences allowing tax-free gains up to $250,000 for single filers and $500,000 for joint filers [3] - Landlords can deduct mortgage interest, property tax, operating expenses, depreciation, and repairs from rental income [4] - The 1031 exchange allows deferral of capital gains taxes when selling investment properties, enabling reinvestment without immediate tax liabilities [5] - Real estate serves as a powerful tax shelter, particularly beneficial for wealthy investors in high tax brackets [6] Group 3: Municipal Bonds - Municipal bonds provide capital to local governments for infrastructure projects, with interest earned generally exempt from federal taxes [7]

Core Insights - The municipal bond market is experiencing a positive shift as Q3 shows strong performance, suggesting that fixed income investors should consider municipal exposure in their portfolios [1][2][3] Market Performance - An oversupply of municipal bonds at the beginning of the year has improved, with Q3 seeing increased demand and municipal bonds outperforming broader bond indexes [2][3] - Yields across the municipal bond curve have decreased, with longer maturities providing the best returns due to higher duration, highlighting a steep yield curve with attractive long-end valuations [3] Investment Solutions - Vanguard offers low-cost passive solutions such as the Vanguard Tax-Exempt Bond ETF (VTEB), which tracks the performance of investment-grade municipal bonds and has an expense ratio of three basis points [4] - For active management, the Vanguard Core Tax-Exempt Bond ETF (VCRM) is recommended, featuring a 12-basis point expense ratio and the ability to adjust holdings based on market conditions [5] - The Vanguard High-Yield Active ETF (VGHY) is a new actively managed option with a 0.22% expense ratio, designed to navigate the complexities of the high-yield municipal market [6]

Core Insights - United Airlines is attempting to raise approximately $522 million in the municipal bond market to fund various airport projects and refinancing efforts [1][2] - The deal faced challenges, with only the refinancing portion being completed due to insufficient investor demand for the catering services and ground services facility bonds, which were shelved [2][3] - United Airlines aims to proceed with the shelved projects next year, with potential for the deal to return to the bond market depending on market conditions, particularly interest rates set by the Federal Reserve [4][5] Industry Overview - The municipal bond market has seen a record amount of issuance this year, with high yield airline bonds outperforming the general index [6] - Airport bond issuance has significantly increased, driven by numerous infrastructure projects across the country as airports undergo renovations [6][7] - The expectation is for continued strong issuance in the municipal bond sector over the next year, reflecting ongoing investment in airport infrastructure [7]

Economic Outlook - The potential end of the government shutdown is expected to boost economic activity, leading to a slight increase in yields [2][3] - The 10-year benchmark yield is currently at 4.10%, reflecting market reactions to the shutdown developments [3] Market Dynamics - The market is experiencing a push-pull scenario with fluctuations in yields between 4.08% and 4.16% due to mixed economic data and varying comments from the Federal Reserve [4] - There is caution regarding early data points post-shutdown, as they may be incomplete and require careful interpretation [4] Federal Reserve Policy - The expectation is that the Federal Reserve will not initiate rate cuts in December, with decisions likely pushed to the first quarter of the following year [5][6] - Inflation remains around 3%, leading the Fed to seek more confidence in a downward trend before considering further rate cuts [5] Credit Market Opportunities - Credit markets are characterized by tight spreads, with low yields compared to treasuries, but the fundamentals for investment-grade bonds remain strong [7][8] - Intermediate-term bonds and Treasury Inflation-Protected Securities (TIPS) are recommended for their potential positive real returns [8][9] Investment Recommendations - Mortgage-backed securities are highlighted for their government backing and higher yields compared to treasuries [9] - Municipal bonds are favored for investors in high tax brackets due to attractive tax-equivalent yields and generally high credit quality [10]