SHYD: Shorten Up for Rising Rates
Introducing SHYD: Market Vectors Short Municipal High-Yield Index ETF
JIM COLBY: I'm Jim Colby, senior municipal strategist and portfolio manager for the Market Vectors suite of municipal bond ETFs. On January 13, we launched SHYD, our sixth municipal bond ETF. One of the compelling features of SHYD, which stands for "Short High-Yield" Municipal Index ETF, is that it is uniquely positioned to deal with some of the problems that investors are facing in today's markets.
Why High-Yield Municipal Bonds?
COLBY: Investors may consider municipal high-yield for a couple of very important reasons. Number one: implicit default rates are very low compared to their corporate counterparts. When investors take a close look at these numbers, they often are surprised at the attractiveness of municipal high-yield compared to corporate high-yield.
In the current municipal marketplace, high-yield municipal bonds are delivering in some instances 2-3% more yield per bond than investment-grade municipal bonds. In this low interest rate environment, that's a significant difference. With the costs associated with investing in individual bonds, the low cost and the yield available in high-yield municipal bonds make a compelling argument.
COLBY: Another important consideration for high yield, and specifically our new ETF, SHYD, is its positioning on the yield curve. SHYD will invest in bonds with maturities of 10 years and less. That means a reduced exposure to changes in interest rates. As fixed-income investments are subject to rising rates, their principal is reduced the further out on the yield curve, or the longer the maturity structure that exists in those particular portfolios. SHYD was specifically designed to reduce the impact of rising rates over the long term.
- - - - - - - - - -
The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com
Municipal bonds are subject to risks related to litigation, legislation, political changes, local business or economic conditions, conditions in underlying sectors, bankruptcy or other changes in the financial condition of the issuer, and/or the discontinuance of the taxation 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. The Fund may also be subject to credit risk, interest rate risk, call risk, lease obligations, tax risk, and risks associated with non-investment grade securities. The market for municipal bonds may be less liquid than for taxable bonds. There is no guarantee that the Fund’s income will be exempt from federal or state income taxes. Federal or state changes in income or alternative minimum tax rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Capital gains, if any, are subject to capital gains tax. For a more complete description of these and other risks, please refer to each Fund’s prospectus.
A portion of the Fund's dividends may be subject to federal, state, or local income taxes or may be subject to the federal 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. Please read the prospectus and summary prospectus carefully before investing.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.
The “Net Asset Value” (NAV) of a Market Vectors Exchange Traded Fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV.
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 Securities Corporation. © 2014 Van Eck Global.
Van Eck Securities Corporation, Distributor
335 Madison Avenue, New York, NY 10017