American Century Municipal Bond Funds

Building Blocks for Diversified Portfolios


Tax advantages. Income. Relatively low risk. In today’s market climate, these may be good reasons to consider municipal bonds (munis) as a building block for your clients’ portfolios.



Why Municipal Bond Funds?

Why Municipal Bond Investments?

Munis are a building block for clients’ portfolios.

Why American Century?

Why American Century?

Our approach focuses on consistent income with less risk.


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Investment Choices

Review our muni solutions.

Help Clients Understand Municipal Bond Funds.

Understand Municipal Bonds

Learn about their attributes and unique risks.



Why Municipal Bond Investments?

Municipal bond strategies can help address challenges many investors face today.

Taxes and Income

Munis have provided income with advantages for investors in different tax brackets.

A Portfolio Building Block

Munis generate income that’s free from federal taxes and, in some cases, state and local taxes.

They also offer potential yield advantages for those in both moderate and higher tax brackets.

20-Year Average Yields

Munis generate income that’s free from federal taxes and, in some cases, state and local taxes.

Data as of 2/28/2021. Source: FactSet.
Yield data is based on Yield to Worst calculated over the past 20 years.
Municipal bonds are represented by the Bloomberg Barclays Municipal Bond Index. Taxable bonds are represented by the Bloomberg Barclays US Aggregate Index.

Past performance is no guarantee of future results.

Federal tax rates used to calculate tax-equivalent yields: Moderate Tax Bracket – 28%;  High Tax Bracket: 40.8%. 

Consistency of Returns

Munis have generated consistently positive returns.

A History of Wealth Preservation

Since 1998, Munis have delivered positive returns over most rolling time periods.

Percentage of Time Municipal Bonds
Increased in Value per Holding Period
Bloomberg Barclays Municipal Bond Index
Monthly Rolling Investment Periods Since 1998

Munis have delivered positive returns over most time periods.

Data as of 2/28/2021. Source: FactSet.
Municipal bonds are represented by the Bloomberg Barclays Municipal Bond Index.

Past performance is no guarantee of future results.


Wealth Preservation

Many clients are looking for return consistency. Munis have historically answered the call.

Resilience under Market Pressure

During periods of extreme stock market stress, municipal bonds balanced broad market declines

Total Returns During Periods of Market Stress

During periods of extreme stock market stress, municipal bonds balanced broad market declines.

Source: FactSet.
Dot.com bust: 3/31/2001 - 10/31/2001; Global Financial Crisis: 2/28/2007 - 9/30/2008
Municipal bonds are represented by the Bloomberg Barclays Municipal Index; stocks are represented by the S&P 500 Index.

Past performance is no guarantee of future results.

Portfolio Diversification

Munis react differently than other investments, helping manage market risk in a portfolio.

Portfolio Diversification

Lower correlations have helped municipal bonds diversify portfolios

Correlations versus Investment Grade Municipal Bonds –
Trailing 10 Year

Lower correlations have helped municipal bonds diversify portfolios.

12/31/2010 – 12/31/2020. Source: FactSet.
Investment categories are represented by the following indexes: Municipal Bonds: Bloomberg Barclays Investment Grade Index; U.S. Core Bonds: Bloomberg Barclays US Aggregate Index; Global Bonds: Bloomberg Barclays Global Aggregate Index; U.S. High Yield: Bloomberg Barclays US High Yield Index; U.S. Equity: S&P 500 Index.

A diversified portfolio includes a variety of investments that react differently to the same market or economic event. Diversification is measured by correlation, the extent to which the performance of two investments move in relation to each other. Correlations range from -1.0 (always moving in opposite directions) to +1.0 (always moving in the same direction). Although diversification cannot guarantee a profit or protect against loss of principal, it has helped smooth the ups and downs of a single type of investment.



Why American Century?

Municipal bond strategies that pursue consistency, an attractive risk/return tradeoff, and are competitively priced*. Find them here.



Actively Managed

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Municipal Bonds Are Not Created Equal

Credit ratings don’t always signify the best investment opportunities, so we seek out the bonds  we believe offer attractive risk/return potential.


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Index Limitations

Unlike index-constrained funds, we have the flexibility to anticipate and adjust to changing markets.


A Traditional Management Style

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Managed with Consistency in Mind

Our portfolios focus on consistent income by emphasizing individual bonds and seeking to avoid the potential pitfalls of leverage.


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Research-Driven Bond Selection

We analyze factors driving credit quality, so we can include non-rated and off-benchmark issues and steer clear of bonds we believe are excessively risky.


An Eye on Expenses

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Cost-Conscious

We strive to keep our fund expenses competitive, which we believe helps improve returns. View our  fund expenses


*Source: Morningstar. As of 6/30/2021

Based on a peer group comparison of expense ratios for each fund. The expense ratio for Investor Class shares are below median for each fund within their Morningstar category: Intermediate-Term Tax-Free – US Muni National Intermediate; High Yield Municipal -- US Fund High Yield Muni; California Intermediate-Term Tax-Free – US Fund Muni California Intermediate; California High-Yield-Municipal -- US Fund California Long. The expense ratio for Diversified Municipal Bond ETF is below the peer group median within the Morningstar US Muni National Intermediate category.



Our Municipal Fund Line-Up


  Intermediate-Term Tax-Free High Yield Municipal California Intermediate-Term Tax-Free California High-Yield Municipal Diversified Municipal Bond ETF
Role in Portfolio Core holding Satellite holding Core holding for California residents Satellite holding for California residents Core holding
Potential Benefits Monthly income free of  federal taxes. Higher federal tax-free income potential  for more risk-tolerant investors. Monthly income free of state and federal taxes. Higher state and federal tax-free income potential  for more risk-tolerant investors. A single fund solution that provides federal tax-free income across investment grade and high yield.
Benchmark S&P Intermediate Term National AMT-Free Municipal Bond Index S&P Municipal Bond 50% Investment Grade/50% High Yield Index S&P Intermediate Term California AMT-Free Municipal Bond Index S&P Municipal Bond California 50% Investment Grade/50% High Yield Index S&P National AMT-Free Municipal Bond Index
Investment Vehicle Mutual Fund Mutual Fund Mutual Fund Mutual Fund ETF
Inception Date 03/02/1987 03/31/1998 11/9/1983 12/30/1986 9/10/2018
Available Share Classes Investor, I, A, C, Y Investor, I, A, C, Y Investor, I, A, C, Y Investor, I, A, C, Y ETF
Ticker/Expense Ratios
  Intermediate-Term Tax-Free High Yield Municipal California Intermediate-Term Tax-Free California High-Yield Municipal Diversified Municipal Bond ETF
Investor Class TWTIX ABHYX BCITX BCHYX  
Net/Gross Expense Ratio 47 bps/47 bps 60 bps/61 bps** 47 bps/47 bps 50 bps/50 bps  
I Class AXBIX AYMIX BCTIX BCHIX  
Net/Gross Expense Ratio 27 bps/27 bps 40 bps/41 bps 27 bps/27 bps 30 bps/30 bps  
ETF   TAXF
Net/Gross Expense Ratio   29 bps/29 bps

 

**

The gross expense ratio is the fund's total annual operating costs, expressed as a percentage of the fund's average net assets for a given time period. It is gross of any fee waivers or expense reimbursement. The net expense ratio is the expense ratio after the application of any waivers or reimbursement. This is the actual ratio that investors paid during the fund's most recent fiscal year. Please see the prospectus for more information.

Returns or yields for the fund would have been lower if 0.01% of the management fee had not been waived. The advisor expects this waiver to remain in effect permanently and cannot be terminated without approval of the Board of Directors. Review the annual or semiannual report for the most current information.

The advisor will waive the portion of the fund's management fee equal to the expenses attributable to the management fees of the American Century funds in which the fund invests. The amount of this waiver fluctuates depending on the fund's daily allocation to other American Century funds. This waiver is expected to remain in effect permanently and it cannot be terminated without the approval of the Board of Trustees.





Understand Municipal Bonds


Munis are loans to local governments and entities.

Munis are bonds issued by local governments and entities.

They pay for bridges, roads, schools, hospitals, libraries and parks—among other things.

They help finance bridges, roads, schools, hospitals, libraries and parks – among other things.

Investors receive interest payments over a set period and the principal at the end of the loan.

Investors receive interest payments over a set period and the principal at the end of the loan. 


The interest is free from federal taxes and sometimes state and local taxes.

The interest is free from federal taxes and sometimes state and local taxes.

Munis may help manage risk because they don’t react the same way other investments do to market events.

Munis may help manage risk because they don’t react the same way other investments do to market events.

This diversification may help smooth overall portfolio returns to help investors pursue their long-term goals.

Low correlations to other types of investments may help smooth overall portfolio returns to help investors pursue their long-term goals.


Fewer Defaults, Less Risk

Many choose municipal bonds in part because of their relatively low risk, as reflected in their lower default rates. The chart below compares muni bond default rates versus similarly rated taxable bonds. While all investing involves risk, understanding these differences may help investors decide which investments best suit their needs.


10-Year Average Cumulative Default Rates, 1970 to 2019

Munis by default:  10-year average default rates versus taxable corporate bonds.


Municipal bonds have a history of significantly lower default rates than taxable corporate bonds.


Source: Moody’s Investors Services. Data as of 12/31/2019.
The letter ratings indicate the credit worthiness of the individual bonds and generally range from Aaa (highest) to D (lowest).Investment grade ratings range from Aaa to Baa; high yield ratings range from Ba to D. 





Featured Insights

How Would Biden’s Tax Agenda Affect Corporate Earnings and Municipal Bonds?

Victor Zhang, CIO, discusses the potential impact of President Joe Biden's proposed wide-ranging tax increases to fund the policy objectives he advocated during the 2020 presidential campaign.

Infrastructure and Tax Proposals Lift Muni Market’s Profile

We believe the American Jobs Plan and Made in America Tax Plan, which propose infrastructure spending and corporate tax hikes, will likely boost the outlook for municipal bonds (munis) and the broad economy.

Municipal Bond Outlook: Still Upbeat as Infrastructure Legislation Progresses

California’s economy faces state-specific challenges from wildfires and drought. But like other states, a strong fiscal backdrop continues to support a positive outlook for the Golden State’s municipal bonds.


Let’s discuss our muni bond strategies

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Credit letter ratings indicate the credit worthiness of the underlying bonds in the portfolio and generally range from AAA (highest) to D (lowest).

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

High-Yield Municipal, Intermediate-Term Tax-Free, California High-Yield Municipal, California Intermediate-Term Tax-Free, Diversified Municipal Bond ETF:

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Interest rate changes are among the most significant factors affecting bond return. When rates decline, bond prices rise and the fund may generate less income. When rates rise, bond prices fall. Depending on your tax situation, investment income may be subject to state and local taxes and the federal alternative minimum tax.

Even though the fund is designed to purchase assets exempt from federal taxes and currently has no exposure to the federal alternative minimum tax (AMT), there is no guarantee that all of the fund's income will be exempt from federal income tax or the federal AMT. Specifically, the portfolio managers are permitted at any time to invest up to 20% of the fund's assets in debt securities with interest payments that are subject to federal income tax and/or federal AMT.

Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax.

There is no guarantee that the investment objectives will be met.

Dividends and yields represent past performance and there is no guarantee that they will continue to be paid. 

The information is not intended as a personalized recommendation or fiduciary advice and should not be relied upon for, investment, accounting, legal or tax advice.

The gross expense ratio is the fund's total annual operating costs, expressed as a percentage of the fund's average net assets for a given time period. It is gross of any fee waivers or expense reimbursement. The net expense ratio is the expense ratio after the application of any waivers or reimbursement. This is the actual ratio that investors paid during the fund's most recent fiscal year. Please see the prospectus for more information.

High-Yield Municipal, California High-Yield Municipal, California Intermediate-Term Tax-Free, Diversified Municipal Bond ETF:

The lower-rated securities in which the fund invests are subject to greater default and liquidity risk, because the issuers of high-yield securities are more sensitive to real or perceived economic changes.

California Intermediate-Term Tax-Free Bond and California High-Yield Municipal:

Because the fund invests primarily in California municipal securities and securities issued by U. S. territories, its yield and share price will be affected by political and economic developments within the state and territories.

The fund currently has no exposure to the federal alternative minimum tax (AMT). The portfolio managers, however, are permitted to invest in assets that may be subject to the federal AMT.

There is no guarantee that all of the fund's income will be exempt from federal or state or local income taxes. The portfolio managers are permitted to invest up to 20% of the fund's assets in debt securities with interest payments that are subject to federal income tax, California state or local income tax and/or the federal alternative minimum tax.

Diversified Municipal Bond ETF:

Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.

This fund is an actively managed ETF that does not seek to replicate the performance of a specified index. To determine whether to buy or sell a security, the portfolio managers consider, among other things, various fund requirements and standards, along with economic conditions, alternative investments, interest rates and various credit metrics. If the portfolio manager considerations are inaccurate or misapplied, the fund's performance may suffer.