Yields on benchmark 10-year municipals climbed to 3.09 percent Aug. 21, the highest since April 2011, Bloomberg data show. For investors in the highest tax bracket, 39.6 percent, the 3.09 percent benchmark yield for 10-year munis is equivalent to a taxable return of 5.12 percent, Bloomberg data show. The yield on 10-year U.S. Treasuries was 2.89 percent Aug. 21, the highest since July 2011.

“Although munis are getting interesting, there might be a better entry point down the road when there’s more clarity in the rate cycle,” said Matthew Tucker, head of iShares fixed- income strategy at BlackRock Inc. in San Francisco.

“If we keep getting higher rates, investors could enter at a more attractive yield level,” he said in a telephone interview.

State and city debt is less expensive than comparable federal securities. Since June 1, yields on top-rated munis maturing in 10 years have been higher than those for similarly- maturing Treasuries every day except for five. The ratio stood at 107 percent Aug. 21, higher than the five-year average of about 101 percent, Bloomberg data show.

While interest rates may increase in the next few weeks and the MUB may continue trading at a discount, the fund does offer investors a way to access the tax-exempt market, Mosley said.

‘More Attractive’

“Municipals as a whole are much more attractive than they’ve been in a while and the MUB is an attractive way to gain exposure to that,” Mosley said. “It’s one of the cheaper parts of a cheap asset class right now.”

Investors in search of tax-free debt to purchase in the near term should buy bonds directly through a broker rather than an exchange-traded fund or a mutual fund structured with a net- asset value, Matt Fabian, managing director at MMA, wrote in an Aug. 19 report.

It’s difficult, if not impossible to predict the full impact of the Fed reducing bond purchases, as well as “where levels will ultimately wind up and whether or not there will be a snap-back rally to follow,” Fabian said in the report. “Accounts unwilling to wait should be investing in individual bonds and not NAV-based instruments.”

$4.5 Billion