ETFs

With supply ballooning, reinvestment dollars at lows of the year, J.P. Morgan's Peter DeGroot argues the next few weeks could offer the best opportunity to buy bonds of the year – and possibly the rate cycle. DeGroot talks about this, plus potential impacts of shifting investor behavior on market liquidity, and what the upcoming election might mean for tax policy and the muni market. Lynne Funk hosts.

"Active ETFs are becoming an integral part of investor portfolios around the world, with financial advisors increasingly incorporating them into their models-based practice," a BlackRock spokesperson said.

Household ownership of individual bonds was the largest category of muni ownership at 44.6%, mutual funds at 19.2%, exchange-traded funds at 3.1% and U.S. banks at 12.4%. While not detailed in the Federal Reserve data, SMAs may hold up to $1.6 trillion currently.

Muni ETFs have grown in popularity ever since the first launch in 2007, gaining a foothold due to their cost-effective nature and ability to help investors acquire a significant amount of diversification.

Household ownership of munis — which includes direct ownership of individual bonds in brokerage accounts, fee-based advisory accounts and SMAs — rose to $1.779 trillion, up 0.3% from Q4 2023 and from 5.6% in Q1 2023.

Despite losses, munis are "being set up nicely" as the summer season approaches, said Jeff Lipton, a research analyst and market strategist.

"In terms of credit quality, high-yield funds proved resilient" while investment-grade funds saw outflows of $673 million, noted J.P. Morgan's Peter DeGroot in a market note.

Muni exchange-traded funds are "dominated" by retail and are "momentum driven," said David Litvack, a tax-exempt strategist and chief investment officer at BofA.

Barclays' Mikhail Foux talks shifting demand, BABs refundings, election effects and what it means for the asset class in a volatile market.

Some participants on the Street estimate that SMAs hold as much as $1.5 trillion of munis while others peg it closer to $1 trillion to $1.3 trillion.