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.
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.
- 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.