Tax-Free Income Just Went On Sale

The bond market's pain is handing you a tax-free raise.

Municipal bonds have sold off hard over the last few weeks as Treasury yields jumped, inflation worries flared up, and new supply flooded the market.

When yields rise, existing bonds lose value. One of my favorite muni funds just took that hit, and it's trading near its 52-week lows.

The Nuveen Municipal Value Fund (NUV) is a closed-end fund holding tax-exempt municipal bonds. Nothing’s changed inside it, and it hasn't cut its monthly payout. The market’s just repricing the bonds it owns, and the shares now trade about 4.7% below their value.

That drop has pushed the yield above 4.7%, free from federal taxes and many state taxes, so check yours. In the 25% bracket, that's like earning about 6.3% on a taxable bond, and in the 35% bracket, closer to 7.2%.

I also like NUV because it uses much less leverage than a conventional muni fund. If you want more yield, leveraged muni funds are much better deals now than when rates were at 1%.