Fixed Income: Municipal – Single State

Posted on by Mike Akins
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A Deep Dive into Single-State Municipal Bond ETFs

Hello, ETF fans! Mike here with another video insight.

Today, we’re doing something a little different: a category spotlight focused on the municipal bond space. Specifically, for everyone looking to optimize their tax strategy, this one’s for you—we’re diving into single-state municipal bond ETFs.

Instead of a traditional written post, I’m walking you through how to use our platform to analyze this unique market segment. Watch the video above to see it in action, or follow along with the summary below.

Building Your Analysis Dashboard

The first step is to set up a custom dashboard in our Navigator tool to evaluate these specific ETFs.

  1. Navigate to Filters: In the Navigator data table, open the “Filters” section.
  2. Apply Classifications:
    • Start by selecting Fixed Income.
    • Next, choose the Municipal Composite.
    • Finally, under “Category,” filter down to only Fixed Income, Municipal, Single State.

This narrows the field to a focused list of 20 ETFs. To make the data even more useful, we can adjust the groupings. By removing “Asset Class” and “Composite” and adding the “Country” grouping, we can see the breakdown by state. (A pro tip: for state-specific ETFs, we override the “Country” field with the relevant state).

Key Insights from the Data

Once the dashboard is set up, we can immediately pull out some powerful insights:

  • Market Landscape: There are currently single-state municipal bond ETFs available for four states: California, New York, Massachusetts, and Minnesota. The primary benefit of these funds is that they offer tax exemptions at the federal, state, and local levels—a triple advantage for in-state investors.
  • Asset Dominance: California and New York dominate this space, with California holding over 86% of the $9.4 billion in total assets under management (AUM).
  • Rapid Growth: This category is expanding quickly. Over the last year alone, $2.5 billion has flowed into these 20 ETFs. The first ETF in this category launched in October 2015, and the accelerating asset growth, especially over the last 18 months, signals strong investor interest.
  • Future Potential: The mutual fund world offers single-state muni products for over 30 states. This suggests there is significant room for growth and new product development in the ETF space. Issuers, take note!

Diving Deeper into Fund Characteristics

The Navigator tool doesn’t just stop at high-level trends. By clicking the hyperlink for the category, you can dive directly into the database to compare the underlying fixed-income characteristics of these ETFs.

A quick look reveals a surprising amount of variety:

  • Duration: The range is wide, from the Invesco New York AMT-Free Municipal Bond ETF (PZT) with an effective duration of over 10 years to the iShares Short-Term California Muni Bond ETF (SCAL) with a duration of just over one year.
  • Credit Risk: We also see a spread in credit risk. The Option-Adjusted Spread (OAS) ranges from over 1 for the Rockefeller New York Municipal Bond ETF (RNY), which takes on more credit risk, down to 0.1 for the Dimensional California Municipal Bond ETF (DFCA).

Your Turn to Explore

The Navigator tool is designed to help you build powerful, customized dashboards to visualize what’s happening in any corner of the market and then dive deep into the research.

I hope this video insight was beneficial. If you have any questions or want to see the platform in action, don’t hesitate to reach out to Team ETF Action. We’ll be happy to get you set up with a demo.

Thanks for watching, and have a great day!

Disclosures

This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.

This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.

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