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A Muni ETF for Investors Seeking Tax Relief

SPDR Nuveen Barclays Municipal Bond ETF offers a portfolio of high-quality muni bonds at a low cost and a relatively attractive tax-equivalent yield.


Thomas Boccellari: Taxable-bond investors interested in exposure to only the highest-quality municipal bonds may consider SPDR Nuveen Barclays Municipal Bond ETF (TFI). The fund tracks a broad index of municipal bonds with an average credit rating of AA- or better. Municipal bonds are bonds issued by state and local governments to fund a variety of projects, such as education, utilities, and transportation. Because municipal-bond interest is exempt from federal taxes, municipal-bond funds are most appropriate for investors in high tax brackets and best used in a taxable accounts.

At first glance, the fund's yield may appear low relative to other fixed-income investments with similar risk. However, when you examine the fund's tax-equivalent yield--or the yield that a taxable bond would need to offer to equal the fund's tax-exempt yield for investors in the top tax bracket--it's actually higher than comparable-risk, taxable-bond funds.

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Thomas Boccellari does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.