The top five holdings of this muni bond fund are St James Parish La Rev Var Rate 0.94% (3.79% of assets); St James Parish La Rev Var Rev B 0.95% (3.20%); Clark Cnty Nev Arpt Rev Ctfs (2.33%); Delaware St Econ Dev Auth 0.97% (1.99%) and Illinois Fin Auth 0.9% (1.82%).
Fidelity Conservative Inc Muni Bd (FCRDX)
From Fidelity Monitor & Insight
Assuming there is demand for the forthcoming flood of new bond issuance, the existing supply that is traded in the so-called secondary market should be unaffected by new supply. On the other hand, the potential downward pressure (increased risk) to munis also comes from an entirely different set of presidential priorities: lower personal income taxes.
Unlike any other asset class, muni bonds are unique in that the vast majority of the roughly $4 trillion market is held by individuals directly and through their mutual funds. Moreover, they are owned predominantly by more highly taxed individuals who appreciate that their coupons (income) are free of federal and often state and local taxes. This makes their tax-equivalent yields more attractive. But if federal taxes are lowered, munis become less attractive relative to today’s higher yields, thereby reducing their value.
For now, our preferred choice is Fidelity Conservative Muni for its limited interest-rate risk.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, February 2017