Municipal bonds haven’t gotten much love over the past couple of years. But that’s likely to change soon.

In December 2010 on 60 Minutes, high-profile analyst Meredith Whitney predicted hundreds of billions in losses from municipal defaults. She was wrong. While there have been a few high-profile defaults recently—such as the three California cities that filed for bankruptcy this summer—the default rate for municipal bonds of all credit qualities is just 0.1 percent. The default rate for all corporate bonds: 11 percent.

The more than $50 billion that was pulled out of muni bond funds after Whitney’s pronouncement has started to trickle back in, due to the attractive tax-exempt yields and relatively solid credits. And the tide is likely to turn back in favor of munis as tax reduction becomes a key concern.

With the recent election essentially maintaining the status quo in Washington, Democrats and Republicans will have to address the spending cuts and tax increases set to take effect in January. The odds seem good that as part of any compromise some Americans, especially those who invest, will soon face higher taxes.

This likely change in focus— away from default concerns and toward tax minimization— should drive a sizable rally in municipal bonds of all stripes, at least until we have a clearer idea of how Congress will address the fiscal challenge.

iShares S&P National AMT-Free Municipal Bond (NYSE: MUB) holds a well-diversified collection of more than 2,000 individual municipal bonds. With a recent yield of just under 3 percent, MUB is one of the highest-yielding, investment-grade muni ETFs out there. It has returned 5.45 percent annualized the past three years and is up some 8 percent in 2012 (through September). And MUB is starting to garner attention: In the first week of November, the ETF had a notable increase in new investment of $56 million.

MUB offers a monthly stream of federally tax-exempt income (capital gains are taxed upon sale). And it only holds bonds that aren’t subject to the alternative minimum tax (AMT). While MUB’s yield may not seem impressive, consider that 3 percent equates to a tax-equivalent yield of 4.6 percent for taxpayers in the top 35 percent tax bracket and 3.5 percent for those in the 15 percent bracket.

You’re not going to find many higher-yielding ETFs without taking on substantially higher risks. The only fixed-income asset class offering a low default rate is US Treasury bonds, and as we all know, there just isn’t enough income there, with the average yield on 10-year Treasuries recently at 1.6 percent.

Another benefit: With an annual expense ratio of 0.25 percent, iShares S&P National AMT-Free Municipal Bond is significantly less expensive than a traditional open-ended mutual fund, while providing more flexibility to trade as you please.

With Congress standing on the precipice of the fiscal cliff and looking to taxpayers to cushion its fall, municipal bonds should yield both capital gains and attractive income streams for some time to come.