Municipals Back in Business: Tax Clarity Sparks Opportunity
July 16, 2025
Read Time 4 MIN
The municipal bond market just received a shot of adrenaline. With the passage of the One Big Beautiful Bill Act, tax-exempt income remains untouched - a significant victory for investors and the muni ecosystem. Coupled with an expanded SALT deduction (up to $40,000), this renewed clarity in tax policy reinforces the strategic value of municipal bonds in both income generation and portfolio construction.
Now, with the fog of legislative uncertainty lifting, it’s time for investors and advisors to recalibrate their approach. Let’s walk through where the opportunities lie and why VanEck’s muni ETF suite is built for this moment.
Investment Grade: Sweet Spot in the Steepness
At the heart of VanEck’s municipal ETF platform is customization of interest rate risk, from short to long duration. While 2024 saw a preference for cash equivalents and ultra-short strategies, the market tide is shifting toward intermediate-term munis, such as the VanEck Intermediate Muni ETF (ITM). Why? Because the steepness of the muni yield curve between 6 to 12 years has been a consistent generator of alpha. SMAs and advisors alike have leaned into this segment, taking advantage of its performance resiliency amid fluctuating rate expectations. Inflows into intermediate-duration strategies continue to climb, and ITM has been a core beneficiary.
Meanwhile, long-duration strategies haven’t enjoyed the same popularity—yet. With persistent uncertainties over fiscal and monetary policy, investors have been cautious about extending out the curve. However, there’s a case to be made for revisiting long munis.
Don’t Sleep on MLN
VanEck’s Long Muni ETF (MLN), focused on long-dated investment-grade munis, presents a compelling taxable-equivalent yield opportunity. As the long end of the curve has steepened, the reward for duration risk has become increasingly attractive. For investors with longer time horizons or those seeking to barbell their muni exposure, MLN offers a unique entry point, especially if rate cuts materialize faster than consensus expects.
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Municipal High Yield: Tight but Attractive
On the opposite end of the credit spectrum sits municipal high yield. The VanEck High Yield Muni ETF (HYD) continues to hold its own despite tight spreads.
As of early July, HYD boasts a taxable-equivalent yield to worst of 8.52% (with a 30-Day SEC Yield of 4.68%. Please see below for HYD standardized performance.), outpacing U.S. corporate high yield, which sits at 7.16%, based on the ICE BofA US High Yield Index (H0A0). While the spread differential is modest, HYD's edge comes from its tax advantage and muni high yield’s relatively low default rates compared to corporate high yield.
The primary constraint? Supply. Unlike the investment-grade muni space, high yield issuance remains light. This supply/demand imbalance has kept spreads narrow, but secondary market liquidity remains healthy. Investors are still able to access yield without sacrificing credit quality, provided they’re selective.
Municipal 2s30s Spread Reaches 5-Year High: Curve Steepening Accelerates
30-Year Muni Yields Hover Near 5%: Long-Term Rates at Multi-Year Highs
Source: Municipal Market Analytics. As of July 8, 2025. Past performance is no guarantee of future results. Not representative of fund performance.
The Supply Surge: A Tailwind for the Remainder of 2025
With the OBBBA now codified, municipalities are expected to accelerate issuance plans, particularly in the investment-grade segment. Infrastructure and essential services funding, once in limbo, may now be fast-tracked. For investors, this means greater access to new credits and potentially more attractive valuations.
As the year unfolds, we anticipate that new issuance will be the dominant force driving muni market dynamics, especially in investment grade. Conversely, limited high yield supply may continue to support an upward pressure on prices and compress yields, but for now, we believe HYD continues to deliver.
Final Thoughts: Recalibrate with Purpose
Municipals are back in the spotlight, and for good reason. Whether it’s through targeted exposure to intermediate duration, tactical long allocations, or high-yield yield enhancement, VanEck’s municipal ETF suite offers tools to meet the moment.
As always, tax-free income isn’t just a benefit; it’s a portfolio strategy. With new clarity from Capitol Hill, investors may want to consider using this window to adjust their muni exposures and position portfolios for both income and resilience going forward.
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Important Disclosures
Definitions
Taxable-Equivalent Yield - The yield a taxable bond must earn to match–after federal taxes–the yield available on a tax-exempt municipal bond (excluding AMT).
30-Day SEC Yield - a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparison 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.
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
VanEck High Yield Muni ETF (HYD) Average Annual Total Returns as of 6/30/2025
Average Annual Total Returns* (%)
| As of June 30, 2025 | |||||||||
| 1 Mo | 3 Mo | YTD | 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | LIFE 02/04/09 | ||
| HYD (NAV) | 0.63 | -1.31 | -1.23 | 0.33 | 2.00 | 0.63 | 2.21 | 4.78 | |
| HYD (Share Price) | 0.89 | -0.83 | -1.54 | 1.39 | 1.86 | 0.64 | 2.43 | 4.80 | |
| MHYX (Index) | 0.64 | -0.81 | -0.64 | 1.68 | 3.97 | 2.76 | 4.24 | 6.51 | |
| Performance Differential (NAV - Index) | -0.01 | -0.50 | -0.59 | -1.35 | -1.97 | -2.13 | -2.03 | -1.73 | |
* Returns less than one year are not annualized.
Index data prior to March 1, 2022 reflects that of the Bloomberg Municipal Custom High Yield Composite Index (LMEHTR). From March 1, 2022 to November 30, 2022, the index data reflects that of the ICE High Yield Crossover Municipal Bond Transition Index (MXYT). From December 1, 2022 forward, the index data reflects that of the Fund's underlying index, the ICE Broad High Yield Crossover Municipal Index (MHYX) and is not intended for third party use.
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.
Total Expense Ratio: 0.32%
30-Day SEC Yield: 4.68% (as of the date this content was published)
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. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least September 1, 2025. “Other Expenses” have been restated to reflect current fees.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Municipal bonds may be less liquid than taxable bonds. A portion of the dividends you receive may be subject to the federal alternative minimum tax (AMT). There is no guarantee that municipal bonds’ income will be exempt from federal, state or local income taxes, and changes in those tax rates or in 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. When interest rates rise, bond prices fall.
An investment in the Funds may be subject to risks which include, among others, fund of funds risk, high portfolio turnover, model and data risks, management, operational, authorized participant concentration and absence of prior active market risks, trading issues, market, fund shares trading, premium/discount, general obligation bond, health care bond, water and sewer bond, special tax bond, transportation bond, private activity bond, sampling, index tracking, replication management, and liquidity of fund shares and non-diversified risks. The funds may be subject to following risks as a result of investing in Exchange Traded Products including municipal securities, performance of underlying funds’ investments, leverage, credit, high yield securities, tax, interest rate, call, state concentration and sector concentration risks. Municipal bonds may be less liquid than taxable bonds. There is no guarantee that a Funds’ income will be exempt from federal, state or local income taxes, and changes in those tax rates or in alternative minimum tax (AMT) 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. A portion of the dividends you receive may be subject to AMT. For a more complete description of these and other risks, please refer to each Fund's prospectus.
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.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
Related Funds
Important Disclosures
Definitions
Taxable-Equivalent Yield - The yield a taxable bond must earn to match–after federal taxes–the yield available on a tax-exempt municipal bond (excluding AMT).
30-Day SEC Yield - a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparison 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.
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
VanEck High Yield Muni ETF (HYD) Average Annual Total Returns as of 6/30/2025
Average Annual Total Returns* (%)
| As of June 30, 2025 | |||||||||
| 1 Mo | 3 Mo | YTD | 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs | LIFE 02/04/09 | ||
| HYD (NAV) | 0.63 | -1.31 | -1.23 | 0.33 | 2.00 | 0.63 | 2.21 | 4.78 | |
| HYD (Share Price) | 0.89 | -0.83 | -1.54 | 1.39 | 1.86 | 0.64 | 2.43 | 4.80 | |
| MHYX (Index) | 0.64 | -0.81 | -0.64 | 1.68 | 3.97 | 2.76 | 4.24 | 6.51 | |
| Performance Differential (NAV - Index) | -0.01 | -0.50 | -0.59 | -1.35 | -1.97 | -2.13 | -2.03 | -1.73 | |
* Returns less than one year are not annualized.
Index data prior to March 1, 2022 reflects that of the Bloomberg Municipal Custom High Yield Composite Index (LMEHTR). From March 1, 2022 to November 30, 2022, the index data reflects that of the ICE High Yield Crossover Municipal Bond Transition Index (MXYT). From December 1, 2022 forward, the index data reflects that of the Fund's underlying index, the ICE Broad High Yield Crossover Municipal Index (MHYX) and is not intended for third party use.
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.
Total Expense Ratio: 0.32%
30-Day SEC Yield: 4.68% (as of the date this content was published)
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. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least September 1, 2025. “Other Expenses” have been restated to reflect current fees.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Municipal bonds may be less liquid than taxable bonds. A portion of the dividends you receive may be subject to the federal alternative minimum tax (AMT). There is no guarantee that municipal bonds’ income will be exempt from federal, state or local income taxes, and changes in those tax rates or in 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. When interest rates rise, bond prices fall.
An investment in the Funds may be subject to risks which include, among others, fund of funds risk, high portfolio turnover, model and data risks, management, operational, authorized participant concentration and absence of prior active market risks, trading issues, market, fund shares trading, premium/discount, general obligation bond, health care bond, water and sewer bond, special tax bond, transportation bond, private activity bond, sampling, index tracking, replication management, and liquidity of fund shares and non-diversified risks. The funds may be subject to following risks as a result of investing in Exchange Traded Products including municipal securities, performance of underlying funds’ investments, leverage, credit, high yield securities, tax, interest rate, call, state concentration and sector concentration risks. Municipal bonds may be less liquid than taxable bonds. There is no guarantee that a Funds’ income will be exempt from federal, state or local income taxes, and changes in those tax rates or in alternative minimum tax (AMT) 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. A portion of the dividends you receive may be subject to AMT. For a more complete description of these and other risks, please refer to each Fund's prospectus.
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.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.