ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Alternatives Channel
      • Artificial Intelligence
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Education
      • ETF Investing
      • ETF Strategist
      • Faith-Based Investing
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Invest Beyond Cash
      • Leveraged & Inverse
      • Modern Alpha
      • Portfolio Strategies
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Gold/Silver/Critical Materials
        • Crypytocurrency
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
    • Market Outlook
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Database Categories
    • Indexes
    • Scenario Analysis
    • Watchlists
    • Head-To-Head ETF Comparison Tool
    • Mutual Fund To ETF Converter
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • Gaining Perspective Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Beyond Basic Beta Channel
  2. Muni ETFs May Be What Frustrated Investors Need
Beyond Basic Beta Channel
Share

Muni ETFs May Be What Frustrated Investors Need

Tom LydonSep 14, 2022
2022-09-14

With the widely observed Bloomberg US Aggregate Bond Index down 11.55% year-to-date, it’s easy to understand why fixed income investors are frustrated and why many are departing the related funds, including exchange traded funds.

Those scenarios could get worse before improving because the August reading of the Consumer Price Index (CPI) was worse than expected, indicating that the Federal Reserve likely has no choice but to continue raising interest rates, potentially in aggressive fashion.

To that end, it’s not surprising that investors yanked $156 billion from taxable bonds this year, as of July 31, but those moves could be hasty, particularly when considering the utility of municipal bonds and ETFs such as the VanEck Vectors High Yield Muni ETF (HYD A-).

One of the reasons to consider HYD today is that with bonds, just like with any other asset class, timing matters, and selling low and buying higher is a strategy that adversely affects a portfolio’s returns.

“For taxable-bond funds, we found that investor returns lagged total returns by 117 basis points, on average, for the 10 years ended Dec. 31, 2021,” noted Morningstar analyst Amy Arnott. “On the surface, that’s actually better than the 1.7-percentage-point return gap across all category groups. But the low level of returns for taxable-bond funds makes this return gap particularly damaging. Over the trailing 10-year period, total returns averaged only about 3.6% per year, and investors missed out on about a third of those returns, earning only 2.4% per year in dollar-weighted terms.”

In favor of HYD are the points that municipal bonds offer credible recession protection and that state and local finances are currently strong, indicating defaults and downgrades are likely to be few and far between.

Additionally, amid a coming wave of folks entering retirement, some investors may be compelled to return bond ETFs such as HYD over the near term.

“Fixed-income holdings also play an increasingly important role as millions of investors transition into retirement. Based on data from the U.S. census bureau, 20.3 million Americans (or 6.2% of the population) are between age 60 and 64 and will reach retirement age within the next several years. An additional 52.4 million individuals (or 16.8% of the U.S. population) were already 65 or older as of mid-2021,” added Arnott.

To top it off, HYD offers the benefits of a 30-day SEC yield of 4.24%, which is well above what investors earn with 10-year Treasuries.

For more news, information, and strategy, visit the Beyond Basic Beta Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2025 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X