Municipal Bond sTRATEGIES

Our Latest Thinking

Explore our latest insights and commentaries on the municipal bond space


Why Municipal Bonds?

Municipal bonds are used to fund the public works projects that affect all of us every day. For investors, municipal bonds can also play an important role in generating retirement income.

Tax-Free Income

  • Interest on most municipal bonds is exempt from regular federal income tax in addition to the state and local income taxes in the state or locality where they are issued.1
  • Munis historically have provided a higher tax-equivalent yield than most other types of bonds

Municipal Bond Yields Have Remained Strong2

Yield-to-Worst as of March 31, 2020
  • Tax Equivalent Yield
  • Yield

Risk Management Benefits

1. Low Default

Munis have historically had a very low default rate compared to corporate bonds

Average Cumulative 10-Year Default Rates3


2. Diversification

Like other bonds, munis have had a low correlation to stocks — they’ve had diversification benefits relative to other types of bonds, as well

Municipal Bond Correlations With Various Asset Classes4

5-Year Period Ending March 31, 2020




US Stocks


US Treasuries


US Bonds


US Coporate Bonds

A Solution for Today’s Market

During a market sell off, there may be an opportunity to increase income by investing in the higher-yielding bonds. By contrast, worried investors sitting on the sidelines may miss out on this potential income.

With munis, income is the primary driver of total returns,which can help to cushion overall municipal bond total returns once interest rates eventually rise.

Our Approach

Municipal bond managers can take very different approaches to investing. At Franklin, we stick to an active and conservative approach.

Income Oriented

Our managers focus on maximizing monthly tax-free income for shareholders.

Active Management Matters

An active, research-driven approach is critical given the vast size, nuance and complexity of the municipal market with approximately 100,000 municipal issuers and 940,000 outstanding bond issues.

Conservative Philosophy

Our managers believe in managing risk by building well diversified portfolios and do not use leverage and derivatives which cause unnecessary volatility in portfolios.

Strict Credit Analysis

Our research analysts conduct exhaustive research of the entire municipal bond landscape, to determine an issuer’s ability to make bondholders whole in the face of potential negative pressures.

Experience and Expertise

With more than 40 years of municipal bond investing experience and a seasoned team of over 30 investment professionals, we have one of the largest and most tenured teams in the industry.

Our Offering

Franklin Templeton is one of the largest municipal managers in the nation.
Over 30 tax-free strategies cover all geographies and the full credit quality spectrum and are available through mutual funds, ETFs and SMAs.

State Specific Muni Strategies


Federal Muni Strategies

  1. For investors subject to the alternative minimum tax, a small portion of fund dividends may be taxable. Distributions of capital gains are generally taxable.
  2. Source: Bloomberg. (Bloomberg Barclays Municipal Index, Bloomberg Barclays US Treasury Index, Bloomberg Barclays US Aggregate Index, Bloomberg Barclays US MBS Index, Bloomberg Barclays US Corporate Index). Indexes are unmanaged, and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. See for additional data provider information. The yield to worst (YTW) is the lowest potential yield that can be received on a bond without the issuer actually defaulting. The tax-equivalent yield is used by investors to compare taxable and tax-exempt securities after accounting for federal taxes (excluding AMT). For this comparison, we used the tax rate of 40.80%.
  3. Source: Moody’s Corporation. Most recent annual data available.
  4. Municipal Bonds are represented by Bloomberg Barclays Municipal Bond Index, US Stocks are represented by S&P 500 Index, Commodities are represented by Bloomberg Commodity Index, US Corporate Bonds are represented by Bloomberg Barclay US Corporate Bond Index, US Treasuries are represented by Bloomberg Barclays US Treasury Index, US Bonds represented by the Bloomberg Barclays US Aggregate Bond Index.