Van Eck Global - Since 1955


Shorten Up for Rising Rates - Tuesday, 01/21/2014

This past Tuesday we launched SHYD, Market Vectors® Short High-Yield Municipal Index ETF. SHYD seeks to track an index that only includes bonds with 1-10 years until maturity. The focus on this maturity range has generally meant lower duration — or sensitivity to changes in interest rates — and yields competitive with those of an all-maturity high yield municipal bond index. Less rate sensitivity has generally meant less of a negative impact on total return during periods of rising interest rates.

Historical Municipal Index Yield and Duration Profiles 

Rising Rates Had Less Impact on The Shorter Duration Index 

Index performance is not illustrative of Fund performance. Fund performance current to the most recent month end is available by visiting marketvectorsetfs.com. Past performance does not guarantee future results.


SHYD offers:

  • High Yield, Short Duration Focus
    The Index comprises highest yielding municipal bonds with maturities of 1-10 years. This potentially provides lower sensitivity to interest rates than all-maturity high yield municipal bond funds.

     
  • Enhanced Liquidity
    The Index includes 25% BBB investment-grade exposure for added liquidity.

     
  • Diverse Sector Exposure and Low Default Rates
    The Index covers a wide range of muni sectors and securities with historically low default rates.1  


Learn more about SHYD » 

SHYD seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Barclays Municipal High Yield Short Duration Index (BMHYTR). Municipal bonds are subject to risks related to litigation, legislation, political change, conditions in underlying sectors or in local business communities and economies, bankruptcy or other changes in the issuer's financial condition, and/or the discontinuance of taxes supporting the project or assets or the inability to collect revenues for the project or from the assets. Bonds and bond funds will decrease in value as interest rates rise. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds. SHYD is subject to risks associated with non-investment grade (high yield) securities. SHYD had no operating history prior to January 13, 2014.

1Source: Moody's US Municipal Bond Defaults and Recoveries, 1970-2012.

Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Duration is represented by duration to worst, which measures the duration of a bond computed using the bond's nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality. Yield to worst measures the lowest of either yield-to-maturity or yield-to-call date on every possible call date.

Short Muni: The Barclays AMT-Free Short Continuous Municipal Index covers investment-grade municipal bonds with a nominal maturity between 1-6 years. Interm Muni: The Barclays AMT-Free Intermediate Continuous Municipal Index covers investment-grade municipal bonds with a nominal maturity between 6-17 years. Long Muni: The Barclays AMT-Free Long Continuous Municipal Index covers investment-grade municipal bonds with a nominal maturity of 17+ years. All-Maturity HY Muni: The Barclays Municipal Custom High Yield Composite Index covers high yield rated (75%) and BBB-rated (25%) municipal bonds with a nominal maturity of 1+ years. Short HY Muni: The Barclays Municipal High Yield Short Duration Index covers high yield rated (75%) and BBB-rated (25%) municipal bonds with a nominal maturity between 1-10 years.


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Important Disclosure 

Van Eck Associates Corporation does not provide tax, legal or accounting advice. Investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service.

Please note that MUNI NATIONs written by Jim Colby represent his opinions and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Global. © 2014 Van Eck Securities Corporation. MUNI NATION is a trademark of Van Eck Associates Corporation.

All indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.

Any discussion of specific securities mentioned in the commentary is neither an offer to sell nor a solicitation to buy these securities.

Municipal bonds are subject to risks related to litigation, legislation, political change, conditions in underlying sectors or in local business communities and economies, bankruptcy or other changes in the issuer’s financial condition, and/or the discontinuance of taxes supporting the project or assets or the inability to collect revenues for the project or from the assets. Bonds and bond funds will decrease in value as interest rates rise. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds.

The income generated from some types of municipal bonds may be subject to state and local taxes as well as to federal taxes on capital gains and may also be subject to alternative minimum tax.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR | 888.658.8287. Please read the prospectus and summary prospectus carefully before investing.  

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