While the yield sounds attractive, HYD could prove even more vulnerable than MUB in a rising rate environment because the former has an effective duration of 10.6 years and a modified duration of 10.1 years. Combine expectations for rising rates with the notion that municipal bankruptcies could jump and it is fair to say the near-term outlook for municipal bonds is fraught with challenges.
Market Vectors High-Yield Municipal Bond ETF
ETF Trends editorial team contributed to this report.
Tom Lydon’s clients own HYD.