Municipal bonds have long been a safe haven for investors. With backing from tax dollars, they involve less risk than many corporate bonds. And their tax-exempt status often translates to a favorable after-tax return for those falling into higher tax brackets. But, as the recent market rout has shown, that doesn’t make them immune to risk.
A benchmark index of muni bonds fell 2.85% on April 7, 2025, marking its biggest daily drop since at least 1994, according to Bloomberg data. While municipalities continue to issue bonds, investor demand has fallen sharply amid the tariff-driven rout. The result is falling prices for investors and higher borrowing costs for local governments.
Investors seeking safer options may want to consider actively managed muni bond ETFs, which offer targeted exposure to reduce risk, increase yield, and potentially generate greater total returns from capital appreciation.
Why Invest in Munis?
The muni market is under pressure in recent days thanks to a combination of Congress debating a reduction of the muni bond tax exclusion, the tariff spat influencing broader asset prices and allocations, and the upcoming tax season. However, many of these demand-side factors are rooted in uncertainty rather than a tangible change in the underlying market.
Instead, the tangible change to the economics of muni bond prices comes from a steady increase in supply. By March, nearly $74 billion in munis were issued, and fund managers expect the full-year figure to hit $513 billion — the highest level since the 1980s. Many issuers are likely trying to lock in lower yields given the potential impact of tariffs on inflation over the coming year.
Despite these supply and demand disruptions, muni bonds remain an attractive fixed-income asset, especially for high-net-worth investors. The spread between high-grade muni bonds and comparable federal debt has narrowed substantially this year, making the bonds potentially more attractive for investors across the income spectrum — not just high-net-worth investors.
Nuveen’s New Muni ETFs
Nuveen recently launched a pair of new actively managed ETFs in the muni bond space — the Nuveen Municipal Income ETF (NUMI) and the Nuveen High Yield Municipal Income ETF (NHYM), offering investors a unique opportunity to fine-tune exposure in the space.
NUMI offers a 3.59% 30-day SEC yield via a portfolio of investment-grade, long-term muni bonds with a weighted average maturity of more than ten years. The fund managers focus on identifying undervalued issuers with 65% of net assets going toward investment-grade bonds and up to 35% tilting toward higher yields.
Meanwhile, NHYM offers a higher 4.26% 30-day SEC yield with a focus on non-investment-grade and unrated muni bonds. Unlike MUNI, up to 65% of net assets go to bonds with a BBB/Baa or lower rating with distressed securities accounting for up to 10% of the fund’s total net assets.
“The NHYM and NUMI strategies bring two of our highest conviction active strategies to market in the wrapper that is increasingly in-demand by muni investors,” said Daniel Close, Head of Municipals at Nuveen, in a press release announcing the new funds. “NUMI directly answers the significant appetite in the market for longer duration allocations."
The funds have modest total expense ratios of 0.29% and 0.35%, respectively, and pay monthly distributions to shareholders. In addition, the funds’ yields are exempt from federal income tax, creating an opportunity to generate attractive after-tax yields.
Alternative Active Muni ETFs
These ETFs are sorted by YTD total return, which ranges from 1% to 1.4%. They have AUM between $26M and $289M, with expenses running between 0.15% and 0.34%. They are currently yielding between 3.2% and 4.2%.
| Name | Ticker | Type | Active? | AUM | YTD Total Ret (%) | Yield | Expense |
|---|---|---|---|---|---|---|---|
| PGIM Ultra Short Municipal Bond ETF | PUSH | ETF | Yes | $28.9M | 1.4% | 3.5% | 0.15% |
| PGIM Municipal Income Opportunities ETF | PMIO | ETF | Yes | $26.4M | 1.4% | 4.2% | 0.25% |
| Eaton Vance Short Duration Municipal Income ETF | EVSM | ETF | Yes | $289M | 1.3% | 3.2% | 0.19% |
| T. Rowe Price Intermediate Municipal Income ETF | TAXE | ETF | Yes | $26M | 1.2% | 3.7% | 0.24% |
| Capital Group Municipal High-Income ETF | CGHM | ETF | Yes | $131M | 1% | 3.8% | 0.34% |
The Bottom Line
Muni bonds have experienced some turbulence in recent days alongside the rest of the market, but they remain a critical component for many investment portfolios. That said, investors wary of index-based funds may want to consider actively managed alternatives, like Nuveen’s new lineup of municipal bond ETFs.
