Risks Gathering in Municipal Bonds

The manager of Fidelity Intermediate Municipal Income says he has grown cautious following munis' strong returns and large inflows into muni funds.

Municipal bonds have enjoyed a fine run. Debt issued by state and local government entities, as measured by the Bank of America Merrill Lynch Municipal Master index, has returned 6.9% annualized over the past three years -- handsome performance by bond standards. Some of that return results from bond-price appreciation, but much of it has come in the form of interest that is exempt from federal income tax.

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Elizabeth Leary
Contributing Editor, Kiplinger's Personal Finance
Elizabeth Leary (née Ody) first joined Kiplinger in 2006 as a reporter, and has held various positions on staff and as a contributor in the years since. Her writing has also appeared in Barron's, BloombergBusinessweek, The Washington Post and other outlets.