A Bright Idea Among Municipal Bond ETFs

HYD “is the third-largest of all municipal bond ETFs. The fund has a weighted average maturity of 20.83 years and duration of 8.3, which signify the sensitivity to interest rate changes. The fund mitigates credit risk to a degree with the allocation of approximately 33% of the portfolio to munis with BBB ratings from Standard & Poor’s. The fund has a portfolio allocation of 2.84% to Puerto Rican municipal bonds,” according to Investopedia.

Related: An Alternative Muni Bond ETF Strategy

Moreover, low and even negative yields on global government bonds have made U.S. assets, including munis, increasingly more appealing relative to other fixed-income assets. For example, foreign investors have increased the amount of municipal debt they hold by 44% to $85 billion from 2009 through 2015, according to the Federal Reserve.

HYD “has a distribution yield of 4.72% and an expense ratio of 0.35%. Over the last three years prior to 2016, the fund has an annualized return of 3.53%. Its five-year annualized gain of 7.74% places this fund’s returns for the time frame among the highest of all municipal bond ETFs,” adds Investopedia.

For more information on the munis market, visit our municipal bonds category.

VanEck Vectors High Yield Municipal Index ETF