Colby is a Senior Municipal Strategist with more than 30 years of fixed income experience, responsible for Market Vectors municipal bond investments.
The secondary market for municipal bonds has been somewhat subdued the past several days. The broad market successfully absorbed over $10 billion in new issues last week, with some selling of high-grade muni bonds in the secondary market, possibly to fund purchases or restructure segments of existing portfolios. Municipal bond yields have been moving slightly lower but have generally underperformed U.S. Treasuries, which I believe makes their relative valuations look all the more appealing to non-traditional managers looking for potential trading opportunities.
The table below shows the ratios of AAA municipal bonds to U.S. Treasuries as of 6/14/2012, based on the Municipal Market Data (MMD scale).1 With nominal yields of municipals currently well above those of U.S. Treasuries, in my opinion this suggests that municipal bonds must be in the discussion as an attractive near-term choice for inclusion in portfolio allocation models. I currently see value in the 7 to 15 year maturity range, accessible through the Market Vectors Intermediate Municipal Index ETF (NYSE Arca: ITM).
MMD Ratio to Treasuries (%)
1In the municipal bond market, the accepted measure for the risk-free rate is the triple-A scale published by Municipal Market Data every day at 3:00 PM (commonly referred to as the MMD scale).
Market Vectors High-Yield Municipal Index ETF
Market Vectors Intermediate Municipal Index ETF
Market Vectors Short High-Yield Municipal Index ETF
Market Vectors CEF Municipal Income ETF
666 Third Avenue
New York, NY 10017
ETF Fund shares are not individually redeemable and will be issued and redeemed at the 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.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus and summary prospectus contain this and other information. Please read the prospectus and summary prospectus carefully before investing.