Tax-Exempt Yield in 2026: Our Playbook

Key Takeaways:

• Cash yields float, while munis allow investors to lock in tax exempt income at today’s higher rates.
• After tax municipal yields are competitive again for high bracket taxable investors.
• A structured muni approach matters more than predicting the next move in rates.

Click here to view each fund’s standardized performance. Yield alone should not be the basis for an investment decision. Please see 30-Day SEC Yield definition below.

The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.

Many clients started 2026 with the same comfortable portfolio feature they carried through 2024–2025: a large cash or cash‑plus allocation that finally paid them something again. That posture made sense while the path of policy rates was uncertain and price volatility was punishing duration.

But now the conversation is shifting from: What’s my money market yielding today? to a more advisor-relevant question: How do I turn today’s still-elevated rate environment into a structured source of tax-advantaged income while current yields remain elevated?

With the Federal Reserve maintaining the federal funds target range at 3.50%–3.75% at its late‑January meeting, the market has clearer visibility than it did a year ago. That does not guarantee where rates go next, but it does make a practical planning point easier: cash is a floating-rate instrument, while municipal bonds are one of the more scalable ways to lock in tax‑exempt income across maturities and credit tiers.

Why Municipal Bonds Are Attractive Again in 2026

The strongest muni pitch in 2026 isn’t that rates are about to fall. It’s that the market is offering a workable tradeoff between income and risk again, especially for taxable accounts, while technicals remain supportive.

One factor is simply the level of all‑in, after‑fee tax‑exempt yield available in the public market. As of 02/09/2026, VanEck’s national municipal lineup spans from short-duration exposure with a 2.44% 30‑Day SEC Yield to higher‑income approaches north of 5%, depending on structure and underlying risk. For many high‑bracket households, that is enough yield to make munis work again versus taxable alternatives once you do the tax math.

Another factor is reinvestment. Advisors don’t need to be tactical traders to appreciate that the muni market is seasonal and flow driven. Multiple market commentaries have highlighted sizable early‑year principal-and-interest redemptions that typically create reinvestment demand.

For example, some analysts have estimated outsized reinvestment flows, including $47B arriving February 1 and $32B on March 1, alongside an expectation that 2026 supply could approach $600B. When reinvestment demand is heavy and the calendar is manageable, bid levels can stay firm even without a risk‑on backdrop.

Finally, now matters because the short end can move quickly. When clients sit in cash waiting for the perfect entry point, they’re often making an implicit bet that cash yields will remain attractive long enough to justify the reinvestment risk. In the event of a pause‑then‑cut cycle, that can be an expensive assumption.

How Advisors Can Explain Municipal Bond Yields to Clients

The most effective muni conversations rarely start with tax-free. They start with taxable equivalent yield.

A simple framing is: if a client is in the 37% federal bracket, a 4.09% tax‑exempt yield is comparable to about 6.5% taxable on a federal-only basis (4.09 ÷ (1 − 0.37)). Using VanEck Long Muni ETF (MLN) as an example, VanEck listed a 4.09% 30‑Day SEC Yield as of 02/09/2026. That’s before any state-tax considerations, which can materially widen the gap for clients in high‑tax states¹.

If you want to be more precise for high-income households, remember that the comparison taxable yield may also be exposed to the 3.8% Net Investment Income Tax (NIIT), while tax‑exempt municipal bond interest itself is generally excluded from NIIT. In other words, the taxable alternative may have a higher effective tax rate than the headline federal bracket suggests. The usual caveats apply such as client-specific thresholds, filing status, and income mix matter.

One more planning nuance that is easy to miss in client conversations: even though muni interest is federally tax‑exempt, tax‑exempt interest can be included in MAGI for Medicare IRMAA calculations, which can affect Parts B and D premiums for higher‑income retirees. For clients near IRMAA cliffs, that is not a reason to avoid munis, but it is a reason to coordinate fixed income choices with professional tax planning.

A Practical Toolkit: Using Vaneck ETFs to Access the Muni Market

For many practices, individual bonds remain the gold standard for customization, ladders, and cash-flow planning. But ETFs solve problems advisors face every day: instant diversification, liquidity, account scalability, and operational simplicity across households.

VanEck’s municipal lineup is built around clear maturity and credit lanes, which can make portfolio construction more modular. Here is a snapshot of several commonly used exposures:

VanEck’s Municipal Lineup

Source: VanEck. As of 2/9/2026. Past performance is no guarantee of future results. Yield alone should not be the basis for an investment decision. Please see 30 Day SEC Yield definition below. Van Eck Associates Corporation (the “Adviser”) will pay all expenses of the Funds, except for the fee payments under the investment management agreements, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least September 1, 2026.

A few advisor-oriented implementation observations follow naturally from that menu.

In households where muni exposure is replacing some portion of cash, SMB (short muni) is often the cleanest behavioral bridge: you are not asking the client to make a dramatic duration bet, you are asking them to convert floating yield into tax‑exempt yield while keeping volatility relatively contained. The tradeoff is obvious and honest, SMB will not keep up with long munis if the curve rallies, but it can reduce reinvestment risk compared with staying entirely in cash.

For the core allocation in taxable accounts, intermediate maturity tends to be the most defensible anchor because it is easier to hold through drawdowns. ITM’s role is not to win a rate-call contest; it is to keep clients invested in a segment of the curve that can deliver tax‑exempt income without the headline volatility of the long end.

When the objective is explicitly to lock in income, MLN (long munis) is the more direct expression. VanEck’s published 30‑Day SEC Yield* for MLN as of 02/09/2026 was 4.09%. That is the type of number that can reframe the money markets feel safe conversation, particularly for clients whose time horizon and risk capacity allow them to tolerate market swings.

For clients asking for more yield than high‑grade munis offer, SHYD and HYD provide a choice that is often under-discussed: do you want to take additional credit risk primarily in the front part of the curve (SHYD), or do you want both credit risk and more duration (HYD). VanEck listed SHYD’s 30‑Day SEC Yield at 3.54% and HYD’s at 4.37% as of 02/09/2026. Advisors can use that distinction to align the yield sleeve with the client’s real risk tolerance rather than simply chasing the highest headline yield.

XMPT is a different animal and should be presented that way. It is an ETF that provides exposure to municipal closed-end funds, which often use leverage and can trade at discounts or premiums to NAV. That structure can boost income (5.81% 30‑Day SEC Yield as of 02/09/2026) but it also introduces additional layers of risk and cost; VanEck listed a 1.97% total expense ratio for XMPT. In practice, many advisors treat this as an opportunistic satellite allocation rather than a core muni holding.

Risk Management Points That Matter In 2026

A muni re‑entry story is only as strong as the risk framing that accompanies it.

Interest-rate risk is still the biggest behavioral risk, especially in long duration. If you use MLN or HYD to lock in income, you should also set expectations that these exposures can experience meaningful drawdowns when rates rise, even if credit is stable. That conversation is not a compliance chore; it is what keeps clients invested long enough to harvest the income they said they wanted.

Credit risk is not theoretical in munis, particularly in high yield and in sectors that can be vulnerable to idiosyncratic pressure. The broader municipal market has historically exhibited low default incidence relative to corporates, but low does not mean none, and sector selection matters. Moody’s long-run default study is a useful reminder that defaults can be rare overall yet still show up in pockets.

Call risk and reinvestment risk are also easy to underestimate. Many munis are callable, and if rates fall meaningfully, portfolios can experience call activity that returns principal when clients least want it returned. This is another reason to avoid overselling a single “set it and forget it” yield number, what matters is the income path through a cycle.

Finally, due diligence and disclosure are part of the product. For advisors who want a clean, repeatable way to help clients understand the bonds behind the funds (or to research individual CUSIPs when needed), EMMA is the SEC-designated public source for municipal disclosures and data.

Making Munis a Planning Decision, Not A Market Call

If you are looking for a clean message to bring to clients in early 2026, it’s this: municipal bonds are not a prediction; they are a planning tool. With policy rates still elevated, reinvestment flows supportive and tax-equivalent yields compelling for many taxable households, advisors can reposition some cash into a structured muni allocation that matches time horizon and risk capacity, without pretending to know the exact path of rates.

VanEck’s municipal ETFs can function as straightforward building blocks across maturity and credit exposures, from cash‑adjacent short munis to longer and higher‑income sleeves. The best outcome is not picking the perfect point on the curve. It’s getting clients into a portfolio they can hold long enough for tax‑exempt income to do its job.