Invesco has launched an ETF investing in taxable municipal bonds issued by US local governments.
Listed in London, the Invesco US Municipal Bond Ucits ETF provides generally higher yields than are available from US investment grade corporate bonds without taking as much risk, the firm said.
The index the ETF tracks – the ICE BofA US Taxable Municipal Securities Plus Index – is currently yielding around 0.30% more than the typical US investment grade credit benchmark, while offering higher credit quality, said Invesco, adding that the ETF is the first of its kind in Europe.
Gary Buxton, head of Emea ETFs and indexed strategies at Invesco, said: “This launch opens the door to an asset class that until now has been difficult for investors to access. Municipal bonds, or ‘munis’ for short, offer higher yields, better average credit ratings and much lower default rates than US investment grade credit.”
A recent change to US tax law has spurred a “substantial increase” in the issuance of taxable municipal bonds over the past two years. Nearly US$140 billion of debt was issued in 2020.
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