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Short-Term National Municipal Bond ETFs
(click on symbol for data and articles)

iShares S&P Short Term AMT-Free National Municipal Bond Fund (NYSEARCA:SUB)
Market Vectors-Lehman Brothers AMT-Free Short Municipal Index ETF (NYSEARCA:SMB)
PIMCO Short Term Municipal Bond Strategy Fund (NYSEARCA:SMMU)
PowerShares VRDO Tax-Free Weekly Portfolio (NYSEARCA:PVI)
SPDR Lehman Short-Term Municipal Bond ETF (NYSEARCA:SHM)
SPDR S&P VRDO Municipal Bond ETF (NYSEARCA:VRD)

Intermediate-Term National Municipal Bond ETFs

Grail McDonnell Intermediate Municipal Bond ETF (NYSEARCA:GMMB)
Market Vectors-Lehman Brothers AMT-Free Intermediate Continuous Municipal Index (NYSEARCA:ITM)
Market Vectors Pre-Refunded Municipal Index Fund (NYSEARCA:PRB)
PIMCO Intermediate Municipal Bond Strategy Fund (NYSEARCA:MUNI)

Long-Term National Municipal Bond ETFs

iShares S&P National Municipal Bond Fund (NYSEARCA:MUB)
Market Vectors-Lehman Brothers AMT-Free Long Continuous Municipal Index (NYSEARCA:MLN)
PowerShares Insured National Municipal Bond Portfolio (NYSEARCA:PZA)
PowerShares Build America Bond Portfolio (NYSEARCA:BAB)
SPDR Lehman Municipal Bond ETF (NYSEARCA:TFI)

End-Date National Municipal Bond ETFs

iShares 2012 S&P AMT-Free Municipal Series (NYSEARCA:MUAA)
iShares 2013 S&P AMT-Free Municipal Series (NYSEARCA:MUAB)
iShares 2014 S&P AMT-Free Municipal Series (NYSEARCA:MUAC)
iShares 2015 S&P AMT-Free Municipal Series (MUAD)
iShares 2016 S&P AMT-Free Municipal Series (MUAE)
iShares 2017 S&P AMT-Free Municipal Series (MUAF)

State-Specific Municipal Bond ETFs

iShares S&P California Municipal Bond Fund (NYSEARCA:CMF)
iShares S&P New York Municipal Bond Fund (NYSEARCA:NYF)

Municipal Bond CEFs (Closed-End Funds) By State
(click on symbol for data and articles)

Arizona Municipal Bond CEFs
BlackRock MuniYield Arizona Fund, Inc. (NYSEMKT:MZA)
Delaware Investments Arizona Municipal Income Fund (NYSEMKT:VAZ)
Nuveen Arizona Dividend Advantage Municipal Fund (NYSEMKT:NFZ)
Nuveen Arizona Dividend Advantage Municipal Fund 2 (NYSEMKT:NKR)
Nuveen Arizona Dividend Advantage Municipal Fund 3 (NYSEMKT:NXE)
Nuveen Arizona Premium Income Municipal Fund (NYSE:NAZ)

California Municipal Bond CEFs
BlackRock CA Insured Municipal Income Trust III (BCK)
BlackRock CA Municipal 2018 Income Trust (NYSE:BJZ)
BlackRock CA Municipal Income Tr II (BCL)
BlackRock California Insured Municipal 2008 Term Trust (BFC)
BlackRock California Investment Quality Municipal Trust (RAA)
BlackRock California Municipal Bond Trust (BZA)
BlackRock California Municipal Income Trust (NYSE:BFZ)
BlackRock Insured Municipal Term Trust (BMT)
BlackRock MuniHoldings California Insured Fund, Inc. (NYSE:MUC)
BlackRock MuniYield California Fund, Inc. (NYSE:MYC)
BlackRock MuniYield California Insured Fund, Inc. (NYSE:MCA)
Eaton Vance California Municipal Income Trust (NYSEMKT:CEV)
Eaton Vance Insured CA Municipal Bond II (NYSEMKT:EIA)
Eaton Vance Insured California Municipal Bond (NYSEMKT:EVM)
MFS California Insured Municipal (NYSEMKT:CCA)
Morgan Stanley California Insured Municipal Income Trust (NYSE:IIC)
Morgan Stanley California Quality Municipal Securities (NYSE:IQC)
Morgan Stanley Insured California Municipal Securities (NYSE:ICS)
Neuberger Berman California Intermediate Municipal Fund (NYSEMKT:NBW)
Nuveen California Dividend Advantage Municipal Fund (NYSE:NAC)
Nuveen California Dividend Advantage Municipal Fund 2 (NYSEMKT:NVX)
Nuveen California Dividend Advantage Municipal Fund 3 (NYSEMKT:NZH)
Nuveen California Investment Quality Municipal Fund (NYSE:NQC)
Nuveen California Municipal Market Opportunity Fund (NYSE:NCO)
Nuveen California Municipal Value Fund (NYSE:NCA)
Nuveen California Performance Plus Municipal Fund (NYSE:NCP)
Nuveen California Premium Income Municipal Fund (NYSEMKT:NCU)
Nuveen California Quality Income Municipal Fund (NYSE:NUC)
Nuveen California Select Quality Municipal Fund (NYSE:NVC)
Nuveen California Select Tax-Free Income Portfolio (NYSE:NXC)
Nuveen Insured California Dividend Advantage Municipal Fund (NYSEMKT:NKL)
Nuveen Insured California Premium Income Municipal Fund (NYSE:NPC)
Nuveen Insured California Premium Income Municipal Fund 2 (NYSE:NCL)
Nuveen Insured California Tax-Free Advantage Municipal Fund (NYSE:NKX)
Nuveen North Carolina Dividend Advantage Municipal Fund (NYSEMKT:NRB)
Nuveen North Carolina Dividend Advantage Municipal Fund 2 (NYSEMKT:NNO)
Nuveen North Carolina Dividend Advantage Municipal Fund 3 (NYSEMKT:NII)
Nuveen North Carolina Premium Income Municipal Fund (NYSE:NNC)
PIMCO California Municipal Income Fund III (NYSE:PZC)
Van Kampen California Value Municipal Income Trust (NYSE:VCV)

Colorado Municipal Bond CEFs
Delaware Investments Colorado Insured Municipal Income Fund (NYSEMKT:VCF)

Connecticut Municipal Bond CEFs
Nuveen Connecticut Dividend Advantage Municipal Fund (NYSEMKT:NFC)
Nuveen Connecticut Dividend Advantage Municipal Fund 2 (NYSEMKT:NGK)
Nuveen Connecticut Dividend Advantage Municipal Fund 3 (NYSEMKT:NGO)
Nuveen Connecticut Premium Income Municipal Fund (NYSE:NTC)
PIMCO CA Municipal Income Fund (NYSE:PCQ)
PIMCO CA Municipal Income Fund II (NYSE:PCK)

Florida Municipal Bond CEFs
BlackRock Florida Insured Municipal 2008 Term Trust (NYSEARCA:BRF)
BlackRock Florida Insured Municipal Income Trust III (NYSE:BAF)
BlackRock Florida Investment Quality Municipal Trust (NYSEMKT:RFA)
BlackRock Florida Municipal 2020 Term Trust (NYSE:BFO)
BlackRock Florida Municipal Bond Trust (NYSE:BIE)
BlackRock Florida Municipal Income Trust (NYSE:BBF)
BlackRock MuniHoldings Florida Insured Fund (NYSE:MFL)
BlackRock MuniYield Florida Fund (NYSE:MYF)
BlackRock MuniYield Florida Insured Fund (NYSE:MFT)
Delaware Investments Florida Insured Municipal Income Fund (NYSEMKT:VFL)
Eaton Vance Florida Municipal Income Trust (FEV)
Eaton Vance Insured FL Municipal Bond (EIF)
Nuveen Florida Investment Quality Municipal Fund (NQF)
Nuveen Florida Quality Income Municipal Fund (NUF)
Nuveen Insured Florida Premium Income Municipal Fund (NFL)
Nuveen Insured Florida Tax-Free Advantage Municipal Fund (NWF)
Van Kampen Trust for Inv FL Muni (VTF)

Georgia Municipal Bond CEFs
Nuveen Georgia Dividend Advantage Municipal Fund (NYSEMKT:NZX)
Nuveen Georgia Dividend Advantage Municipal Fund 2 (NYSE:NKG)
Nuveen Georgia Premium Income Municipal Fund (NYSEMKT:NPG)

Maryland Municipal Bond CEFs
BlackRock Maryland Municipal Bond Trust (NYSEMKT:BZM)
Nuveen Maryland Dividend Advantage Municipal Fund (NYSEMKT:NFM)
Nuveen Maryland Dividend Advantage Municipal Fund 2 (NYSEMKT:NZR)
Nuveen Maryland Dividend Advantage Municipal Fund 3 (NYSEMKT:NWI)
Nuveen Maryland Premium Income Municipal Fund (NYSE:NMY)

Massachusetts Municipal Bond CEFs
Eaton Vance Insured MA Municipal Bond (NYSEMKT:MAB)
Eaton Vance Massachusetts Municipal Income Trust (NYSEMKT:MMV)
Nuveen Insured Massachusetts Tax-Free Advantage Municipal Fund (NYSEMKT:NGX)
Nuveen Massachusetts Dividend Advantage Municipal Fund (NYSEMKT:NMB)
Nuveen Massachusetts Premium Income Municipal Fund (NYSE:NMT)
The Massachuetts Health & Education Tax-Exempt Trust (NYSEMKT:MHE)
Van Kampen Massachusetts Value Municipal Income Tr (NYSEMKT:VMV)

Michigan Municipal Bond CEFs
BlackRock MuniYield Michigan Insured Fund II, Inc. (NYSE:MYM)
BlackRock MuniYield Michigan Insured Fund, Inc. (NYSE:MIY)
Eaton Vance Insured MI Municipal Bond (NYSEMKT:MIW)
Eaton Vance Michigan Municipal Income Trust (NYSEMKT:EMI)
Minnesota Municipal Income Fund II (NYSEMKT:MXN)
Nuveen Michigan Dividend Advantage Municipal Fund (NYSEMKT:NZW)
Nuveen Michigan Premium Income Municipal Fund (NYSE:NMP)
Nuveen Michigan Quality Income Municipal Fund (NYSE:NUM)

Minnesota Municipal Bond CEFs
Delaware Investments Minnesota Municipal Income Fund II (NYSEMKT:VMM)
Minnesota Municipal Income Portfolio (NYSEMKT:MXA)

Missouri Municipal Bond CEFs
Nuveen Missouri Premium Income Municipal Fund (NYSEMKT:NOM)

New Jersey Municipal Bond CEFs
BlackRock MuniHoldings New Jersey Insured Fund, Inc. (NYSE:MUJ)
BlackRock MuniYield New Jersey Fund, Inc (NYSE:MYJ)
BlackRock MuniYield New Jersey Insured Fund, Inc. (NYSE:MJI)
BlackRock MuniYield NY Insured Fund, Inc. (NYSE:MYN)
BlackRock New Jersey Investment Quality Municipal Trust (NYSEMKT:RNJ)
BlackRock New Jersey Municipal Bond Trust (NYSEMKT:BLJ)
BlackRock New Jersey Municipal Income Trust (NYSE:BNJ)
Eaton Vance Insured New Jersey Municipal Bond (NYSEMKT:EMJ)
Eaton Vance New Jersey Municipal Income Trust (NYSEMKT:EVJ)
Nuveen New Jersey Dividend Advantage Municipal Fund (NYSEMKT:NXJ)
Nuveen New Jersey Dividend Advantage Municipal Fund 2 (NYSEMKT:NUJ)
Nuveen New Jersey Investment Quality Municipal Fund (NYSE:NQJ)
Nuveen New Jersey Premium Income Municipal Fund (NYSE:NNJ)
Van Kampen Trust for Inv NJ Muni (NYSE:VTJ)

New York Municipal Bond CEFs
Alliance New York Municipal Income Fund (NYSE:AYN)
BlackRock Muni NY Intermediate Duration Fund, Inc. (NYSE:MNE)
BlackRock MuniHoldings New York Insured Fund, Inc. (NYSE:MHN)
BlackRock New York Insured Municipal 2008 Term Trust (NYSE:BLN)
BlackRock New York Investment Quality Muni Trust (NYSEMKT:RNY)
BlackRock New York Municipal Bond Trust (NYSE:BQH)
BlackRock New York Municipal Income Trust (NYSE:BNY)
BlackRock NY Insured Municipal Income Trust III (NYSE:BSE)
BlackRock NY Municipal 2018 Income Trust (NYSE:BLH)
BlackRock NY Municipal Income Tr II (NYSEMKT:BFY)
Eaton Vance Insured New York Municipal Bond Fund (NYSEMKT:ENX)
Eaton Vance Insured New York Municipal Bond Fund II (NYSEMKT:NYH)
Eaton Vance New York Municipal Income Trust (NYSEMKT:EVY)
Morgan Stanley New York Quality Muncipal Securities (NYSE:IQN)
Neuberger Berman New York Intermediate Municipal Fund (NYSEMKT:NBO)
Nuveen Insured New York Dividend Advantage Municipal Fund (NKO)
Nuveen Insured New York Premium Income Municipal Fund (NNF)
Nuveen Insured New York Tax-Free Advantage Municipal Fund (NYSE:NRK)
Nuveen New York Dividend Advantage Municipal Fund (NYSE:NAN)
Nuveen New York Dividend Advantage Municipal Fund 2 (NYSEMKT:NXK)
Nuveen New York Investment Quality Municipal Fund (NQN)
Nuveen New York Municipal Value Fund (NYSE:NNY)
Nuveen New York Performance Plus Municipal Fund (NYSE:NNP)
Nuveen New York Quality Income Municipal Fund (NUN)
Nuveen New York Select Quality Municipal Fund (NVN)
Nuveen New York Select Tax-Free Income Portfolio (NYSE:NXN)
PIMCO New York Municipal Income Fund III (NYSE:PYN)
PIMCO NY Municipal Income Fund (NYSE:PNF)
PIMCO NY Municipal Income Fund II (NYSE:PNI)
Putnam New York Investment Grade Municipal Trust (PMN)
Van Kampen Trust for Inv NY Muni (NYSE:VTN)

Ohio Municipal Bond CEFs
Eaton Vance Insured OH Municipal Bond (NYSEMKT:EIO)
Eaton Vance Ohio Municipal Income Trust (NYSEMKT:EVO)
Nuveen Ohio Dividend Advantage Municipal Fund 2 (NYSEMKT:NBJ)
Nuveen Ohio Quality Income Municipal Fund (NYSE:NUO)
Nuveen Ohio Dividend Advantage Municipal Fund 3 (NYSEMKT:NVJ)
Nuveen Ohio Dividend Advantage Municipal Fund (NYSEMKT:NXI)
Van Kampen Ohio Quality Municipal Trust (NYSE:VOQ)

Pennsylvania Municipal Bond CEFs
BlackRock Pennsylvania Strategic Municipal Trust (NYSEMKT:BPS)
Eaton Vance Insured Pennsylvania Municipal Bond Fund (NYSEMKT:EIP)
Eaton Vance Pennsylvania Municipal Income Trust (NYSEMKT:EVP)
BlackRock MuniYield Pennsylvania Insured Fund (NYSE:MPA)
Nuveen Pennsylvania Premium Income Municipal Fund 2 (NYSE:NPY)
Nuveen Pennsylvania Investment Quality Municipal Fund (NYSE:NQP)
Nuveen Pennsylvania Dividend Advantage Municipal Fund 2 (NYSEMKT:NVY)
Nuveen Pennsylvania Dividend Advantage Municipal Fund (NYSEMKT:NXM)
Van Kampen Pennsylvania Value Municipal Income Trust (NYSE:VPV)

Texas Municipal Bond CEFs
Nuveen Texas Quality Income Municipal Fund (NYSE:NTX)

Virginia Municipal Bond CEFs
BlackRock Virginia Municipal Bond Trust (NYSEMKT:BHV)
Nuveen Virginia Dividend Advantage Municipal Fund (NYSEMKT:NGB)
Nuveen Virginia Dividend Advantage Municipal Fund 2 (NYSEMKT:NNB)
Nuveen Virginia Premium Income Municipal Fund (NYSE:NPV)

General Municipal Bond CEFs

Alliance CA Municipal Income Fund (NYSE:AKP)
AllianceBernstein National Municipal Income Fund (NYSE:AFB)
American Municipal Income Portfolio (NYSE:XAA)
BlackRock Apex Municipal Fund, Inc. (APX)
BlackRock Insured Municipal 2008 Term Trust (BRM)
BlackRock Investment Quality Municipal Trust (NYSE:BKN)
BlackRock Long-Term Municipal Advantage Trust (NYSE:BTA)
BlackRock Muni Intermediate Duration Fund, Inc. (NYSE:MUI)
BlackRock MuniAssets Fund, Inc. (NYSE:MUA)
BlackRock Municipal 2018 Income Term Trust (NYSE:BPK)
BlackRock Municipal 2020 Term Trust (NYSE:BKK)
BlackRock Municipal Bond Trust (NYSE:BBK)
BlackRock Municipal Income Trust (NYSE:BFK)
BlackRock Municipal Income Trust II (NYSEMKT:BLE)
BlackRock MuniEnhanced Fund, Inc. (NYSE:MEN)
BlackRock MuniHoldings Fund II, Inc. (NYSE:MUH)
BlackRock MuniHoldings Fund, Inc. (NYSE:MHD)
BlackRock MuniHoldings Insured Fund II, Inc. (NYSE:MUE)
BlackRock MuniHoldings Insured Fund, Inc. (NYSE:MUS)
BlackRock MuniVest Fund II, Inc. (NYSE:MVT)
BlackRock MuniVest Fund, Inc. (NYSEMKT:MVF)
BlackRock MuniYield Fund, Inc. (NYSE:MYD)
BlackRock MuniYield Insured Fund, Inc. (NYSE:MYI)
BlackRock MuniYield Quality Fund II, Inc. (NYSE:MQT)
BlackRock MuniYield Quality Fund, Inc. (NYSE:MQY)
BlackRock National Insured Municipal Income Trust III (NYSE:BYM)
BlackRock Strategic Municipal Trus (NYSE:BSD)
Dreyfus Municipal Income (NYSEMKT:DMF)
Dreyfus Strategic Municipal Bond Fund (NYSE:DSM)
Dreyfus Strategic Municipals (NYSE:LEO)
DTF Tax Free Income (NYSE:DTF)
DWS Municipal Income Trust (NYSE:KTF)
DWS Strategic Municipal Income Trust (NYSE:KSM)
Eaton Vance Insured Municipal Bond Fund (NYSEMKT:EIM)
Eaton Vance Insured Municipal Bond II (NYSEMKT:EIV)
Eaton Vance Municipal Income Trust (NYSE:EVN)
Federated Premier Intermediate Municipal Income Fund (NYSE:FPT)
Federated Premier Municipal Income Fund (NYSE:FMN)
Insured Municipal Income Fund (PIF)
Investment Grade Municipal Income Fund (PPM)
MBIA Capital/Claymore Managed Duration Investment Grade Muni (NYSE:MZF)
MFS High Income Municipal Trust (NYSE:CXE)
MFS Investment Grade Municipal Trust (NYSE:CXH)
MFS Municipal Income Trust (NYSE:CMU)
MFS Municipal Income Trust (NYSE:MFM)
Morgan Stanley Insured Municipal Bond Trust (NYSE:IMC)
Morgan Stanley Insured Municipal Income Trust (NYSE:IIM)
Morgan Stanley Insured Municipal Securities (NYSE:IMS-OLD)
Morgan Stanley Insured Municipal Trust (NYSE:IMT)
Morgan Stanley Municipal Income Opportunities Trust (NYSE:OIA)
Morgan Stanley Municipal Income Opportunities Trust II (NYSE:OIB)
Morgan Stanley Municipal Income Opportunities Trust III (NYSE:OIC)
Morgan Stanley Municipal Premium Income Trust (NYSE:PIA)
Morgan Stanley Quality Municipal Income Trust (NYSE:IQI)
Morgan Stanley Quality Municipal Investment Trust (NYSE:IQT)
Morgan Stanley Quality Municipal Securities Trust (NYSE:IQM)
Neuberger Berman Intermediate Municipal Fund (NYSEMKT:NBH)
Nuveen Dividend Advantage Municipal Fund (NYSE:NAD)
Nuveen Dividend Advantage Municipal Fund 2 (NYSEMKT:NXZ)
Nuveen Dividend Advantage Municipal Fund 3 (NYSEMKT:NZF)
Nuveen Insured Dividend Advantage Municipal Fund (NYSEMKT:NVG)
Nuveen Insured Municipal Opportunity Fund (NYSE:NIO)
Nuveen Insured Premium Income Municipal Fund 2 (NYSE:NPX)
Nuveen Insured Quality Municipal Fund (NYSE:NQI)
Nuveen Insured Tax-Free Advantage Municipal Fund (NYSE:NEA)
Nuveen Investment Quality Municipal Fund (NYSE:NQM)
Nuveen Municipal Advantage Fund (NYSE:NMA)
Nuveen Municipal High Income Opportunity Fund (NYSEMKT:NMZ)
Nuveen Municipal Income Fund (NYSE:NMI)
Nuveen Municipal Market Opportunity Fund (NYSE:NMO)
Nuveen Municipal Value Fund (NYSE:NUV)
Nuveen Performance Plus Municipal Fund (NYSE:NPP)
Nuveen Premier Insured Municipal Income Fund (NYSE:NIF)
Nuveen Premier Municipal Income Fund (NYSE:NPF)
Nuveen Premium Income Municipal Fund (NYSE:NPI)
Nuveen Premium Income Municipal Fund 2 (NYSE:NPM)
Nuveen Premium Income Municipal Fund 4 (NYSE:NPT)
Nuveen Quality Income Municipal Fund (NYSE:NQU)
Nuveen Select Maturities Municipal Fund (NYSE:NIM)
Nuveen Select Quality Municipal Fund (NYSE:NQS)
Nuveen Select Tax-Free Income Portfolio (NYSE:NXP)
Nuveen Select Tax-Free Income Portfolio 2 (NYSE:NXQ)
Nuveen Select Tax-Free Income Portfolio 3 (NYSE:NXR)
PIMCO Municipal Advantage Fund (MAF)
PIMCO Municipal Income Fund (NYSE:PMF)
PIMCO Municipal Income Fund II (NYSE:PML)
PIMCO National Municipal Income Fund III (NYSE:PMX)
Pioneer Municipal High Income Advantage Trust (NYSE:MAV)
Pioneer Municipal High Income Trust (NYSE:MHI)
Putnam High Yield Municipal Trust (PYM)
Putnam Investment Grade Municipal Trust (NYSEARCA:PGM)
Putnam Managed Muncipal Income Trust (NYSE:PMM)
Putnam Municipal Bond Fund (PMG)
Putnam Municipal Opportunities Trust (NYSE:PMO)
Putnam Tax-Free Health Care Fund (PMH)
Seligman Select Municipal Fund (SEL)
Van Kampen Advantage Municipal Income Trust (NYSEMKT:VKI)
Van Kampen Muni Opp (NYSE:VMO)
Van Kampen Muni Trust (NYSE:VKQ)
Van Kampen Select Sector Municipal Trust (NYSEMKT:VKL)
Van Kampen Trust for Insured Municipals (NYSE:VIM)
Van Kampen Trust for Investment Grade Municipals (NYSE:VGM)
Western Asset Intermediate Muni Fund, Inc (NYSEMKT:SBI)
Western Asset Managed Municipals Fund, Inc (NYSE:MMU)
Western Asset Municipal High Income Fund, Inc (NYSE:MHF)
Western Asset Municipal Partners Fund, Inc (NYSE:MNP)

What Are They?

  • Municipal bonds, known as "muni bonds", are bonds issued by a state, city, or local government. Interest payments on municipal bonds are generally exempt from Federal taxes. If purchased by a resident of the state that issued the bond, the interest payments may be exempt from Federal and state tax, and if bought by residents of the locality that issued the bond, the interest payments may be exempt from Federal, state and local taxes. For that reason, municipal bond managers offer state-specific bond funds.
  • ETFs are typically index funds which trade close to or at their underlying asset value. In contrast, closed-end funds tend to be actively managed, and due to their structure can trade at significant premia or discounts to their net asset values.
  • Closed-end municipal bond funds often use leverage: the fund borrows money at what low short-term interest rates to purchase longer term bonds that pay higher rates. While leverage increases a fund's yeild and dividend ratio, it also raises risk because a rise in short term rates and decline in long term rates can reduce the fund's net interest income and payout.
  • Some of the CEFs listed here offer insured muni bonds. The insurance guarantees the payment of principal and interest on a bond issue if the issuer defaults, but the value of the insurance is dependent on the financial strength of the insurance companies. The insurers include: AMBAC Assurance Corporation, CIFG Assurance North America, Inc., Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA Insurance Corporation, XL Capital Insurance, Assured Guaranty Corp., MGIC Radian Financial Group and American Capital Access.

Why & How To Use Them

  • Bonds are a core component of diversified portfolios, as they behave differently to stocks and therefore dampen volatility. Bonds are also safer (ie. less volatile) than stocks and generate interest income, making them particularly suitable for people in and nearing retirement. However, bonds tend to produce lower long-term returns than stocks, so younger investors who can tolerate more short-run volatility often opt for a low or zero allocation to bonds.
  • US municipal bonds are safer than corporate bonds but less safe than US Treasury bonds. So they tend to offer higher returns than Treasuries but lower returns than corporate bonds.
  • Municipal bonds are relatively illiquid -- they don't trade in large volumes, and buy-sell spreads may be wide. That makes them well suited to closed-end funds and ETFs, because fund managers can better manage the trading costs and spreads compared to individuals, and the ETF or closed-end fund structure reduces portfolio turnover compared to the traditional mutual fund structure.
  • The strongest reason to own muni funds: tax. Interest from US municipal bonds is usually exempt from federal, state and local taxes if the bonds are issued in the investor's state (check with your accountant). But some muni bonds are taxable, so you have to check the funds carefully.
  • Closed-end funds may be attractive when they trade at discounts to net asset value, despite their higher expense ratios and more limited holdings. For more on this important issue, see Further Reading below.

What to Look Out For

  • Closed-end funds are a specialty. A CEF may look attractive if it trades at a discount to net asset value, but discounts may persist for long periods of time, and higher expenses and poor active management might lead to underperformance. See Further Reading below for more on investing in CEFs.
  • Closed-end funds tend to have higher expense ratios than ETFs, and may be more expensive to purchase and sell as their lower trading volume may result in wider bid-ask spreads.
  • As an alternative to these funds, consider also Broad US Bond ETFs and US government bond ETFs.
  • Because municipal bonds may be free from federal, state and local tax if purchased in the state in which they are issued, municipal bond funds tend to be tailored to residents of a particular state. If you purchase a national municipal bond ETF or closed-end fund, you may not receive the full potential tax benefits of municipal bonds.

Further Reading

This page is part of The Seeking Alpha ETF Selector which sorts ETFs by type, highlights how to use them and what to look out for, and provides links to articles that discuss key issues for investors.

Source: A Guide to Municipal Bond ETFs and Closed-End Funds