Municipal bonds enjoyed a relatively strong run in 2025, and even began the new year on a high note, but even these assets were exposed to some of the macroeconomic problems caused by conflict in the Middle East. In the month of March alone, the Bloomberg Municipal Bond Index fell by more than 2%, though the index has since recuperated much of these losses.
When munis had a weak month, some may have questioned whether municipal fundamentals or their reputation for being a safe haven were starting to waver. However, it quickly became clear that it was far too soon to back out of the municipal market.
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Fundamentals within the municipal sector remain good, with defaults down and credit conditions in a resilient place. Furthermore, the municipal bond market traditionally does well in the summer months, when supply remains low and reinvestment demand hits a high point.
Stories like this serve as a reminder that a month of volatility should not be a barometer for backing out of a sector. Instead, it’s important to make sure advisors and investors are choosing the right kinds of strategies as they cover crucial sectors of their portfolio.
One such strategy could be the (BMOP). An active fixed income ETF from BNY Investments, BMOP looks to offer compelling tax-exempt income through municipal bonds.
When choosing securities to add to its portfolio, BMOP’s portfolio team employs a fundamental credit analysis to find pricing efficiencies in the muni market. Furthermore, the fund looks to provide exposure to a variety of different municipal sectors, while investing in bonds of any duration or maturity.
See More: Worried Inflation Is Back: Why Active Fixed Income Wins
While at least 50% of BMOP’s assets will lie within investment-grade munis, the fund may opt to allocate towards high-yield securities as well. Not only do high-yield munis provide diversification, but they can also help the fund access a deeper income profile than what a traditional municipal bond fund may be able to offer.
In times like these, with geopolitical conditions continuing to shift, opting for an active manager who can flexibly navigate municipal bond sectors and durations could make a lot of sense. BMOP’s experienced portfolio team, combined with the inherent lower-risk benefits that municipal bonds bring to the table, may make the fund an increasingly attractive choice to navigate 2026’s fixed income market.
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