For investors seeking momentum, iShares California Muni Bond ETF (HN:CMF) is probably on radar now. The fund just hit a 52-week high, which is up roughly 3.7% from its 52-week low price of $56.90/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:
CMF in Focus
The 894-securities fund looks to track the S&P California AMT-Free Municipal Bond Index, which measures the performance of the investment grade segment of the California municipal bond market.It charges 25 bps in fees (see all Municipal Bond ETFs here).
Why the Move?
Though the tax reform (or cuts) put muni bonds under pressure, things are giving different cues of late. Demand for muni bonds has been staying strong as taxpayers of seven states (California, Connecticut, Minnesota, New Jersey, New York, South Carolina and Wisconsin) have not been benefited that much from the tax overhaul.
There is limitation on the deductibility of state and local taxes (the SALT deduction) from federal taxes for taxpayers of the said states. The etf.com article went on to mention that “even with the reduction in the maximum federal individual income tax rate from 39.6% to 37%, the cap on the SALT deduction means the combined state and federal maximum effective income tax rates went up in seven states.” This led several investors rush toward California muni bond ETF in the ongoing tax season.
More Gains Ahead?
The fund has a positive weighted alpha of 1.80, which hints at more gains. So, there is definitely still some promise for those who want to ride on this ETF a little longer.
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iShares California Muni Bond ETF (CMF): ETF Research Reports
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Zacks Investment Research