Interest income exempt from federal income tax is among the many distinct advantages that municipal bonds offer to investors. They also show very little correlation with returns from equity investments. Thus, they offer relatively high yields at lower levels of risk and are considered second only to government securities in terms of safety of capital invested. By holding a well diversified portfolio of such securities, mutual funds significantly lower the associated default risk.
Below we will share with you the 5 highest yielding Zacks #1 ranked municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all municipal bond funds, then click here.
| Mutual Fund | SEC Yield |
| Oppenheimer AMT-Free Municpals A | 8.09% |
| Nuveen High Yield Municipal Bond A | 7.15% |
| Eaton Vance High-Yield Municipal Income A | 5.89% |
| Pimco High Yield Muncipal Bond A | 5.81% |
| MFS Muncipal High-Income A | 5.7% |
Oppenheimer AMT-Free Municipals A (OPTAX) seeks high current income free from federal income taxes. The fund primarily invests in municipal securities exempt from federal individual income tax. At least 25% of its assets are used to purchase securities below investment grade. The municipal bond mutual fund returned 3.8% in the last one year period.
The Fund Manager is Daniel G. Loughran and he has managed this municipal bond mutual fund since 2002.
Nuveen High Yield Municipal Bond A (NHMAX) invests the majority of its assets in municipal bonds. At least 65% of its assets are invested in bonds rated investment grade or lower. The municipal bond mutual fund has a ten year annualized return of 3.49%.
As of May 2011, this municipal bond mutual fund held 1407 issues, with 1.40% of its total assets invested in Tennessee Engy Acquisition C Jr R 5.625%.
Eaton Vance High-Yield Municipal Income A (ETHYX) seeks high current income not subject to federal income tax. The fund invests heavily in debt securities issued by the states of the US, the District of Columbia and related government agencies and exempt from federal income tax. The municipal bond mutual fund returned 2.73% in the last one year period.
The municipal bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.99% compared to a category average of 1.05%.
PIMCO High Yield Municipal Bond A (PYMAX) invests the majority of its assets in debt securities exempt from federal income tax. The fund invests without limit in municipal bonds of high quality. The municipal bond mutual fund has a three year annualized return of 1.71%.
The Fund Manager is John Cummings and he has managed this municipal bond mutual fund since 2006.
MFS Municipal High-Income A (MMHYX) seeks high current income, with capital growth as a secondary objective. The fund invests a large portion of its assets in instruments not subject to federal income tax. It may invest substantially all of its assets in debt securities of low quality. The municipal bond mutual fund returned 3.88% over the last one year period.
The municipal bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.70% compared to a category average of 1.05%.
To view the Zacks Rank and past performance of all municipal bond funds, then click here.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.
Zacks Investment Research
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