Tax-exempt municipal bonds in the US offer an attractive alternative to taxable fixed income, says BlackRock.

The asset management giant believes that the recent market sell-off has created opportunities on the municipal market front and recommends investors to tap into state tax-backed and essential service bonds. The asset manager is not as upbeat on land-secured bonds, senior living bonds, bond insurer, student loans and local tax-backed issues.

At the same time, the firm thinks that investors’ appetite for risk is still increasing on the back of positive economic data coming out of the US and the fact that fears over the European sovereign debt crisis appear to be on the wane.

BlackRock sees more value in the corporate bond market than in government bonds whose yields are on the rise.

In equity markets, the asset manager continues to favour the US over other developed markets, and it is also increasingly turning its attention to emerging markets. In terms of sectors, BlackRock singles out healthcare, energy and telecommunications services. The firm is gradually adopting a more favourable view towards financials, but still recommends an overall underweight in the sector.

“The US is improving faster than other parts of the world,” iShares, the ETF arm of BlackRock, said in a separate note. “So far this year, economic data from the US has been better than expected, confirming that the world’s largest economy has experienced a strong first quarter. While real wage growth remains anaemic, there has been a gradual healing of the US labour market. This is related to a slow but consistent growth in corporate earnings and over $1 trillion in cash on balance sheets.”