“For investors who can tolerate more volatility than a traditional high-quality bond portfolio and who want (or need) extra income, adding credit exposure from high-yield bonds to a municipal portfolio is a good idea,” Davidson added.
High-yield munis can find further support ahead as credit risk remains low, supply declined and demand for yield remains strong.
Two high-yield muni options include the he Market Vectors High Yield Municipal Index ETF (NYSEArca: HYD) and SPDR Nuveen S&P High Yield Municipal Bond ETF (NYSEArca: HYMB). However, the funds have a longer duration. HYD has a a 10.47 year duration and a 5.03% 30-day SEC yield. HYMB has a 9.41 year duration and a 4.49% 30-day SEC yield. [A High-Yield Municipal Bond ETF Option]
For more information on the munis market, visit our municipal bonds category.
Max Chen contributed to this article.