WTMU
Core Laddered Municipal Fund
What the “One Big Beautiful Bill” Means for Muni Investors
Published July 16, 2025
Kevin Flanagan
Head of Investment and Fixed Income Strategy
Key Takeaways
- The Fed’s policy stance remains skewed toward potential rate cuts, creating a supportive backdrop for municipal bonds.
- Relative value and attractive taxable equivalent yields provide opportunities for munis for the second half of the year.
- Credit fundamentals in the muni space remain strong, and investors are being rewarded for moving out on the yield curve, particularly in intermediate maturities.
Policy Landscape Supports the Muni Outlook
Municipal bonds are entering a renewed phase of opportunity, driven by two converging forces: Federal Reserve policy and uncertainty surrounding the tax-exempt status of munis being removed from the equation. For investors seeking tax-advantaged income and credit quality, the current environment may offer compelling entry points.
Fed Rate Cuts Still on the Radar: A Tailwind for Munis
Recent remarks from Fed Chairman Powell reiterated that monetary policy remains skewed toward potential rate cuts later this year. Monetary policy decision-making will be highly data-dependent, but a reasonable case scenario still revolves around one or two easing moves by year-end.
For municipal bond investors, this policy direction should be a supporting factor.
Muni Tax-Exempt Status Unchanged
A visible headwind for municipals earlier this year was the concern that the “One Big Beautiful Bill” could potentially remove or alter their traditional tax-exempt status at the federal level. Based on the legislation President Trump signed, there will be no changes on this front, removing a large area of uncertainty for muni investors, accordingly.
Strong Credit, Steep Curve Create Opportunities
Municipal credit fundamentals are among the strongest in years. Many states have built up record-level rainy day funds, and revenue streams have stabilized. This resilience allows investors to take advantage of a steep muni yield curve, particularly in intermediate maturities where yields are especially attractive relative to the risk.
The combination of solid credit quality and a steep curve is a rare alignment—and one that encourages active duration management. Investors willing to move slightly out on the curve can potentially enhance returns without compromising quality.
Strategy and Portfolio Application
For those looking to align portfolios with these favorable conditions, the WisdomTree Core Laddered Municipal Fund (WTMU) and WisdomTree High Income Laddered Municipal Fund (WTMY) offer an active, diversified and laddered approach across the muni maturity spectrum. Their design provides natural rebalancing opportunities while maintaining exposure to income-generating segments of the curve.
Conclusion
With strong credit backdrops and compelling curve dynamics, investors have reason to revisit their approach to tax-exempt fixed income. Whether used as a core holding or a complement to existing bond allocations, WTMU and WTMY are well-positioned to benefit from a relatively attractive investment backdrop within the muni market.
Important Risks Related to this Article
There are risks associated with investing, including the possible loss of principal. Municipal securities carry various risks, including credit, interest rate, prepayment and valuation risks. Issuers may face financial difficulties that impact their ability to meet payment obligations. The value of these securities can fluctuate due to changes in revenue sources, local economic and political conditions, and industry-specific downturns (e.g., education, health care, transportation, utilities). Additionally, tax-exempt income from municipal securities could become taxable due to regulatory changes or issuer noncompliance, potentially reducing their value. Fixed income investments are subject to interest rate risk; their value will normally decline as interest rates rise. Higher-yield securities or “junk” bonds have lower credit ratings and involve a greater risk to principal. Fixed income investments are also subject to credit risk, the risk that the issuer of a bond will fail to pay interest and principal in a timely manner or that negative perceptions of the issuer’s ability to make such payments will cause the price of that bond to decline. While the Fund attempts to limit credit and counterparty exposure, the value of an investment in the Fund may change quickly and without warning in response to issuer or counterparty defaults and changes in the credit ratings of the Fund’s portfolio investments. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.
Neither WisdomTree, Inc., nor its affiliates, nor Foreside Fund Services, LLC, nor its affiliates provide tax advice. All references to tax matters or information provided here are for illustrative purposes only and should not be considered tax advice and cannot be used for the purpose of avoiding tax penalties. Investors seeking tax advice should consult an independent tax advisor.
Categories
Related Products
Related articles
About the contributor
Kevin Flanagan
Head of Investment and Fixed Income Strategy
Kevin serves as the Head of Investment and Fixed Income Strategy. In this role, he writes macro and fixed income-related content and works closely with the sales, research and marketing teams. In addition, Kevin conducts client-facing webinars and meetings, providing expertise on WisdomTree’s existing and future bond ETFs. Prior to joining WisdomTree, Kevin spent 30 years at Morgan Stanley, where he was Managing Director and Chief Fixed Income Strategist for Wealth Management. He was responsible for tactical and strategic recommendations and created asset allocation models for fixed income securities. He was a contributor to the Morgan Stanley Wealth Management Global Investment Committee, primary author of Morgan Stanley Wealth Management’s monthly and weekly fixed income publications, and collaborated with the firm’s Research and Consulting Group Divisions to build ETF and fund manager asset allocation models. Kevin has an MBA from Pace University’s Lubin Graduate School of Business, and a B.S. in Finance from Fairfield University.