A Tale of Two Munis: Finding Value in Taxable Municipal Bonds

For investors in lower income tax brackets, or perhaps entities which pay no income tax at all (IRAs, pension plans, etc.), a recent boost in issuance of taxable municipal debt has enhanced the attractiveness of taxable municipals relative to other taxable fixed income sectors.

Not only have valuations improved relative to taxable corporate bonds, but the higher average credit quality of municipals also provides an appealing way to enhance credit quality and diversify risk late in an economic cycle with little or no yield sacrifice.

While the current opportunity in taxable municipals doesn’t yet rise to that of the post-crisis Build America Bond (BAB) era of 2009-10, if issuance remains elevated, as we expect, and relative valuations attractive, we will continue to add exposure where appropriate.

Read more about the current opportunities in Taxable Municipal Bonds in our latest whitepaper.


This is not a complete analysis of every material fact regarding any company, industry or security. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Baird does not provide tax or legal advice. Please consult your legal or tax professional for specific information.

Fixed income is generally considered to be a more conservative investment than stocks, but bonds and other fixed income investments still carry a variety of risk such as interest rate risk, regulatory risk, reinvestment risk, credit risk, inflation risk, call risk, default risk, political risk, tax policy risk and liquidity risk. In a rising interest rate environment, the value of fixed income securities generally decline and conversely, in a falling interest rate environment, the value of fixed income securities generally increase. Municipal securities investments are not appropriate for all investors, especially those taxed at lower rates.