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Many bond benchmarks have gotten riskier, but that isn’t the case for Munis


"Many bond benchmarks have gotten riskier in recent years, but that isn’t the case in the muni market.

We recently highlighted how the credit quality of the key corporate and aggregate bond benchmarks has deteriorated while their interest rate sensitivity has increased. This matters for investors who hold passive index-tracking investments, like exchange-traded funds (ETFs), that track those indices, because they may be taking on more risk than they originally intended.

These trends are different in the municipal bond market. Despite headline issues like Puerto Rico’s debt negotiations, Detroit’s bankruptcy, or Illinois’ struggles with their large unfunded pension liabilities, risks in the muni market remain low. As a result, municipal bond mutual funds and ETFs can be an appropriate investment option for investors looking to gain exposure to the muni market."
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