JPMorgan Ultra-Short Municipal Income ETF

JMST

Market cap $4.68B

JMST offers low-risk, tax-free income from short-term investment-grade municipal bonds, but yields are notably lower than alternatives. The fund's construction is sound—minimizing interest rate and credit risk—yet its conservative approach results in underwhelming returns. Other short-term muni funds, like SHYM, achieve higher yields by including unrated bonds, which historically have low default rates.

Tariff mayhem continues to cause volatility in markets as investors attempt to make sense of continuous changes. In a tumultuous environment, investors increasingly turned to actively managed bond ETFs this year according to JPMAM research.

JMST is an actively managed ETF focusing on short-term and variable-rate municipal bonds. It is slightly riskier, and slightly more volatile than t-bills. It has a tax-advantaged 3.3% yield. Income seems weak, even accounting for any potential tax benefits.

Municipal bonds are back to offer compelling risk-adjusted opportunities, but future decisions from Washington can either act as a tailwind or headwind. Municipal bond funds saw net inflows during 2024, first annual inflow since 2021—which was a record year. 2024 was a record year in municipal bond issuance. With attractive yields, the market may start to pay more attention to tax-equivalent yield advantages offered through municipal debt.

Specific to the muni market, perhaps the biggest surprise this year has been new issue supply that is running well ahead of expectations, up roughly 40% from last year. We think this increased summer issuance is likely the result of deals getting pulled forward, as issuers may be cautious about coming to market later in the fall ahead of what is likely to be an uncertain U.S. political climate. While municipal credit quality has already peaked, it is entering this period of moderating economic growth from a position of strength.

Actively managed ETFs continued to gain traction in July with $24 billion of net inflows. This represented 19% of the industry's net inflows, which remains impressive given the 7% share of the assets.

Actively managed ETFs continue to remain popular. In the first seven months of 2024, these funds gathered 25% of the industry's net inflows.

Investors seeking momentum may have JPMorgan Ultra-Short Municipal Income ETF JMST) on radar now. The fund recently hit a new 52-week high.

While earning a decent yield on your savings is great, taxes can be a meaningful factor. You can avoid taxes on some interest payments using government-backed bonds.