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  • Muni Nation

    A Holiday Gift from the Muni Market

    Jim Colby ,Portfolio Manager
    December 19, 2017
     

    Worried about tax reform, the U.S. Federal Reserve (Fed) moving interest rates higher, and possibly massive infrastructure spending? Investors may wish to consider the VanEck Vectors® Short High-Yield Municipal Index ETF (NYSE Arca: SHYD®). For those looking, near term, to invest their cash in the municipal bond market, SHYD tells a compelling story.

    With almost half the interest rate sensitivity of VanEck Vectors® High-Yield Municipal Index ETF (NYSE Arca: HYD®), SHYD has provided investors with a yield give up versus HYD of only 77 bps, and nearly 60% of the total return of HYD this year. All of that with a slightly higher overall credit quality.

    While HYD may have provided a total return and yield advantage, we believe SHYD should not be overlooked by investors looking for the municipal bond market to provide some protection from uncertainties, while still earning a potentially high tax-exempt yield. Happy holidays and a prosperous New Year!

    SHYD vs. HYD
    Data as of 12/18/2017

    SHYD HYD
    Duration to Worst (Years) 3.71 6.16
    30-Day SEC Yield 3.16% 3.93%

    SHYD Performance (%) as of 9/30/2017 YTD 1YR 3YR 5YR LIFE
    1/2/2008
    NAV 5.42 0.22 1.94 -- 2.54
    Share Price 5.21 -0.18 1.88 -- 2.47

    HYD Performance (%) as of 9/30/2017 YTD 1YR 3YR 5YR LIFE
    2/4/2009
    NAV 9.46 1.61 5.36 4.06 8.12
    Share Price 9.03 1.45 5.27 3.98 8.11

    Source: VanEck. For performance as of the most recent month end, please click here.

    Returns less than one year are not annualized.

    Expenses: SHYD: 0.35%; HYD: 0.35%. Van Eck Associates Corporation (the "Adviser") will pay all expenses of the Fund, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses.

    The tables present past performance which is no guarantee of future results and which may be lower or higher than current performance. Investment returns and ETF share values will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that dividends and capital gains distributions have been reinvested in the Fund at "Net Asset Value" (NAV).

    The NAV of a VanEck 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. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV.  

    Post Disclosure  

    30-Day SEC Yield is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons among funds. It is based on the most recent 30-day period. This yield figure reflects the interest earned during the period after deducting the Fund's expenses for the period. It does not reflect the yield an investor would have received if they had held the Fund over the last twelve months assuming the most recent NAV. Distributions may vary from time to time.

    Duration to Worst measures the duration of a bond computed using the nearest call date or maturity, whichever comes first. This measure ignores future cash flow fluctuations due to embedded optionality.

  • IMPORTANT MUNI NATION®DISCLOSURE  

    This content is published in the United States for residents of specified countries. Investors are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this content. Nothing in this content should be considered a solicitation to buy or an offer to sell shares of any investment in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction, nor is it intended as investment, tax, financial, or legal advice. Investors should seek such professional advice for their particular situation and jurisdiction.

    VanEck 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 this represents the views of the author and these views may change at any time and from time to time. MUNI NATION is not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-VanEck 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 VanEck. 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 a fund. Certain indices may take into account withholding taxes. An index’s performance is not illustrative of a fund’s performance. Indices are not securities in which investments can be made.

    The Bloomberg Barclays Municipal Bond Index is considered representative of the broad market for investment grade, tax-exempt municipal bonds with a maturity of at least one year. The AAA and BBB indices are sub-sets of this broader index.

    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.

    Diversification does not assure a profit or protect against loss.

    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 a fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.