ALPS Intermediate Municipal Bond ETF

MNBD

Market cap $41.6M

Many fixed income investors are enthusiastic about the bond market's prospects against the backdrop of Federal Reserve easing. But municipal bonds are setting the world ablaze this year.

Risk-averse fixed income investors may be paying renewed attention to municipal bonds amid expectations that the Fed's monetary easing campaign is just getting started. But experienced bond investors know there's more to the story with munis.

Using the ICE AMT-Free US National Municipal Index as the measuring stick, it's fair to say municipal bonds haven't done much of anything from a performance perspective this year. That's despite the fact that aggregate bond indexes have traded higher.

Advisors and ETF industry observers know that one of the fastest-growing segments in ETF Land is at the intersection of active management and fixed income. Whether it's by way of mutual-fund-to-ETF conversions or more new ETFs coming to market, the population of active bond ETFs has swelled in recent years.

Amid a backdrop of rising U.S. government debt, persistent inflation concerns, and increased regulatory scrutiny, the fixed income landscape is undergoing significant shifts. For investors focused on capital preservation and income generation, these changes underscore the importance of a more selective approach to bond investing.

There are scores of municipal bond ETFs on the market today, many of which are cost-efficient, straight-forward, passive funds — hallmarks advisors and investors look for. However, munis are also conducive to active management.

The bond market is massive. That sprawl compels many investors to embrace aggregate bond funds for the fixed income portions of their portfolios.

The muni bond market includes over 50,000 issuers and a wide range of bond types such as school district bonds and revenue bonds linked to airports or housing authorities. This diversity offers investors many options to fit different risk and return profiles.

On a year-to-date basis, broad measures of municipal bonds are trailing the marquee aggregate, investment-grade and junk corporate bond indexes. However, some market observers believe the tide could soon turn in favor of munis.

Buoyed by a spate of mutual-fund-to-ETF conversions, active ETFs made their presence felt in 2024. That accounted for significant percentages of both inflows and launches.