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Muni Investment Opportunities in the Current Environment


TOM BUTCHER: What are the advantages of investing in municipal bonds in the current environment?


JIM COLBY: There’s a great deal of uncertainty and volatility in the overall marketplace right now. Equities are up one day, down the next. Corporations have been impacted significantly by the drop in energy and current oil prices. Alongside all of this is the municipal bond market, which, given its historically strong credit quality and low volatility, will hopefully continue to deliver strong after-tax returns to investors.


The municipal marketplace is one that offers a variety of potential opportunities for investors, whether investors are looking to manage their interest rate risk or achieve higher returns in terms of yield. It may even be overlooked by investors who are departing from other traditional asset classes and looking for a place to put their money. I think the municipal marketplace serves as an asset class that will likely please investors once they have an opportunity to look at it and its potential benefits.


BUTCHER: Thank you. Do you see any specific opportunities today?


COLBY: I think there are two fairly distinct opportunities for investors to consider. One is based on interest rates and interest rate outlooks. The other is based on risk that investors might be willing to assume on a credit basis.


From an interest rate perspective, the history of the municipal yield curve, particularly the intermediate part of it, suggests that over time the steepness of the curve offers an opportunity to gain incremental returns as an investment moves from longer maturities to shorter maturities. We have a product with ticker symbol ITM (Market Vectors AMT-Free Intermediate Municipal Index ETF) that captures that steepness and investment opportunity without taking on a great deal of interest rate risk, which one would normally see and expect from the 30-year part of the yield curve.


The other opportunity is in high yield. Municipal high yield, because it is broadly diversified, doesn't have the distinct and deep exposure to energy that other asset classes may have, particularly in the corporate high yield marketplace. Municipal high yield’s broader diversification still delivers high yield and the taxable equivalent is favorable relative to the corporate market and other asset classes.


Intermediate investment grade and municipal high yield are the two opportunities that I would suggest investors take a look at.


BUTCHER: Wonderful. Thank you very much.


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IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about VanEck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.


Please note that Van Eck Securities Corporation offers investment products that invest in the asset class(es) included in this video. 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. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. Municipal bonds may be less liquid than taxable bonds. There is no guarantee that the Funds’ income will be exempt from federal or state 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. Gains, if any, are subject to gains tax.


Diversification does not assure a profit or protect against loss.


Investing involves substantial risk and high volatility, including possible loss of principal. An investor should carefully consider the investment objective, risks, charges and expenses of the Fund before investing. Bonds and bond funds will decrease in value as interest rates rise. 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.



No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © Van Eck Securities Corporation.


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