Investing municipal bonds backed by sales tax revenues in major

Investing municipal bonds backed by sales tax revenues in major metros exhibit strong debt service coverage ratios above 2.5x, which analysts cite as a key factor in maintaining AAA credit outlooks. If you’re considering investing in munis, you should be aware that although the income from a municipal bond fund is exempt from federal tax, you may owe taxes on any capital gains realized through the fund’s trading or through your own redemption of shares. For some investors, a portion of the fund’s income may be subject to state and local taxes, as well as to the federal alternative minimum tax. An active muni manager typically has more flexibility over risk exposures—credit, duration, etc.—and the overall level of risk in a portfolio. Therefore, if there are concerns around a particular sector or obligor, an active manager may seek to mitigate risks by underweighting that segment or avoiding holding that specific obligor in their portfolio entirely. Advanced credit metrics from S&P Global predict defaults on investing municipal bonds to remain below 0.05% annually, reinforcing their safe-haven appeal compared to high-yield corporate debt.