American Century Intermediate-Term Tax-Free Bond Fund

2 / 5 Stars
1 1 3 2 2
Zacks Investment Research
4 (Sell)
Standard & Poor's
1 / 5 Stars
C+ (Hold)

U.S. News evaluated 83 Muni National Interm Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Note: Profile written for different share class.


The fund has returned 2.60 percent over the past year, 2.84 percent over the past three years, 3.58 percent over the past five years, and 3.12 percent over the past decade.

Trailing Returns Updated 06.30.2014
Year to date 3.3%
1 Year 2.6%
3 Years (Annualized) 2.8%
5 Years (Annualized) 3.6%
10 Years (Annualized) 3.1%

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American Century Tax-Free Bond has been a steady performer.

As of July 03, 2014, the fund has assets totaling almost $3.32 billion invested in 809 different holdings. Its portfolio consists of municipal bonds (debt issued by state and local governments, as well as their agencies).

This municipal bond fund performed well during the turbulence of the credit crisis and continues to post consistent, if not spectacular, returns largely because of its steady, conservative strategy, which puts a premium on bonds at the higher end of the credit spectrum. As of the end of October 2010, its trailing three-year returns landed it in the top third of Morningstar’s intermediate-term national municipal bond category.

Coming out of the downturn, the fund has benefited from an injection of federal stimulus money into state and local governments. This has helped restore some confidence in the muni market, which was shaken in 2008 when hedge funds sold off bonds for liquidity. States are still facing a bleak outlook, but this hasn’t dampened management’s enthusiasm. “Despite negative headlines and municipal credit challenges as a result of the poor economic environment, the portfolio managers still see reasons to be constructive on the municipal market for long-term investors. These reasons include the impending increase in taxes that will be required to boost state and local revenues; the low historical default rates for the asset class; the generally low volatility of municipal bond returns; and attractive taxable-equivalent yields,” management says in its commentary for the third quarter of 2010. Going forward, one of the bigger risks for the fund is rising interest rates. Rates, which are at historic lows, can only go up, and when that happens, bond prices will go down. The fund has returned 2.60 percent over the past year and 2.84 percent over the past three years.

Historically, the fund has done a fine job of achieving its goal: providing investors with steady income and tax advantages (muni investors traditionally do not need to pay federal income taxes on their interest). The fund hasn’t had many blockbuster years, but it has avoided large disasters. Overall, it’s tended to stay close to the middle of the pack in any given year. The fund has returned 3.58 percent over the past five years and 3.12 percent over the past decade.

Investment Strategy

According to the fund’s prospectus: “The portfolio managers primarily buy investment-grade debt securities and, under normal market conditions, will invest at least 80% of the fund’s assets in debt securities with interest payments exempt from federal income tax. The portfolio managers may buy securities of varying maturity ranges ... When determining whether to sell a security, portfolio managers consider, among other things, current and anticipated changes in interest rates, the credit quality of a particular issuer, comparable alternatives, general market conditions and any other factor deemed relevant by the portfolio managers.”

Role in Portfolio

Morningstar calls the fund a “core” holding.


Three managers run the fund.


American Century Intermediate-Term Tax-Free Bond Fund has an expense ratio of 1.47 percent.

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Going forward, one of the bigger risks is rising interest rates. When interest rates go up, bond prices will fall.

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