Lipper data shows $3.1 billion has been invested into tax-exempt funds this year. That's up from the previous year and marks a significant departure from the excessive selling that plagued munis for much of last year.
So are they a buy?
David Seaburg, head of equity sales trading at Cowen and Company, says municipal bonds are now too expensive relative to U.S. Treasurys bonds when looking at their overall averages. "The average yield on a muni is 98 percent that of the [one-year] Treasury," said Seaburg. "Usually, it's over 100 percent. The one-year average is over 107 percent. So, I think they're a little rich right now. I'd back off a little bit here from buying more," Seaburg added.
Mark Newton, chief technical analyst at Greywolf Execution, also wouldn't recommend buying municipal bonds at the moment.
"I don't think this is the right time to chase this move in munis," Newton said. "We've had a nice snapback in the muni market following one of the worst years in two decades. You've had huge outsized gains this year, but it's tough to extrapolate that this needs to continue into end of this year or next year."
Analyzing the chart on a leading ETF that tracks municipal bonds, the iShares National AMT-Free Muni Bond ETF (MUB), Newton sees technical problems.
"The move down last year broke pretty significant trend line support," Newton said. "We have recouped that but, we're right back near former highs. This is the first test in a former high in over eighteen months. So, it's likely we stall out here."
And, despite recent highs, Newton sees deterioration in the MUB's momentum. "Similar to the S&P , prices move higher but momentum has actually waned on an intermediate-term basis," Newton said. "That's a concern."
(Read: Fund investors are looking abroad for dividends)
Fundamentals back up the technicals, according to Newton. "When you talk about underfunded pensions and tax relief, there still remains work to be done," Newton remarked. "And, at least technically, now doesn't seem to be the right time at least to jump in and buy MUB."
To see the full discussion on municipal bonds, with Seaburg on the fundamentals and Newton on the technicals, watch the above video.