Investing in municipal bonds, or munis, has plusses and minuses, a Vanguard manager told CNBC Wednesday, but overall he recommends putting money in select ones.
“As an asset class within fixed income, they make a lot of sense,” said Bob Auwaerter, who joined Vanguard in 1981 and has managed investment portfolios since 1978.
“On the positive side, the technicals, you have a lot of demand, investors are trying to move out of money-market funds."
That's because, due to the losses in the equities markets, investors collectively have been moving billions of dollars out of stocks since 2008, and putting some of that cash into bonds of all types. With regard to muni bonds specifically, the return year-to-date has been 7.5 percent, whereas the S&P 500 has declined by 2 percent.
Auwaerter said that the supply of taxable munis has fallen because governments have have opted instead to generate returns by socking money into taxable Build America Bonds(BABS).