After the recent bout of volatility, investors may find an opportunity in the municipal bond market and related exchange traded funds.
On the upcoming webcast, Attractive Value Now Seen in Municipal Bond Closed-End Funds, James Colby, senior municipal strategist at Van Eck Global, Paul Mazzilli, senior advisor for S-Network Global Indexes, and Michael Cohick, ETF product manager at Van Eck Global, discuss the current fixed-income market environment and the potential buying opportunity in municipal debt.
Investors interested in generating attractive yields can take a look at the Market Vectors CEF Municipal Income ETF (NYSEArca: XMPT), which comes with a 5.68% 30-day SEC yield or a 9.4% taxable equivalent 30-day SEC yield for those in the highest income bracket. [Areas That Fixed-Income ETF Investors Should Keep An Eye On]
In contrast, the widely observed iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB) has a 1.75% 30-day SEC yield or a 3.10% taxable equivalent yield for those in the highest income bracket. [Muni Bond ETFs Provide Stability for a Diversified Investment Portfolios]
Unlike other muni bonds, XMPT tracks shares of municipal closed-end funds. Closed-end funds, or CEFs, are publicly traded investment companies that raise a fixed amount of capital through an initial public offering, and the fund is then structured, listed and traded like a stock on an exchange.
CEFs, like other funds, track a basket of securities. However, unlike other open-ended funds, CEFs only issue a fixed number of shares, so CEFs may experience wider premiums or discounts to its net asset value.
CEFs may also utilize leverage to augment distributions, which helps the securities generate big yields, as can be seen with XMPT. More over, XMPT provides distributions on a monthly basis for those income-oriented investors.
XMPT acts like a fund of funds. The ETF’s top holdings include 4.3% BlackRock Municipal Target Term Trust (BTT), which has a 4.74% distribution rate; 4.2% Nuveen Municipal Value (NUV), which has a 4.02% distribution rate; and 3.6% Nuveen Insured Municipal Opportunity Fund (NIO), which has a 6.38% distribution rate.
Financial advisors who are interested in learning more about municipal bonds can register for the Wednesday, September 16 webcast here.