With Treasury yields sliding lower, income investors are exploring other asset classes with some conservative investors embracing municipal bonds. For those looking for broad-based exposure to various durations and credits in the muni space, the VanEck Vectors Municipal Allocation ETF (Cboe: MAAX), which debuted earlier this year, is a practical option to consider.
MAAX is based off a proprietary model that incorporates momentum, along with both duration and credit risk indicators, to tactically allocate among selected VanEck Vectors Municipal Bond ETFs, which covers the full range of the risk/return spectrum in the munis market and includes five VanEck Vectors Municipal Bond ETF options.
Recent yield and performance data indicate MAAX is strutting its stuff against traditional municipal bond benchmarks.
“The VanEck Vectors Municipal Allocation ETF (MAAX) is currently yielding 2.73% vs. 1.65% for the Bloomberg Barclays Municipal Bond Index, as of August 30, 2019,” said VanEck in a recent note. “August was a big month for MAAX. It returned 2.11% vs. 1.58% for the Bloomberg Barclays Municipal Bond Index. The outperformance largely came from fears of a recession that sent long-term yields down and, concurrently, prices up. The top-performing position was in long-term bonds.”
Municipal debt and bond-related ETFs have been used as a relatively stable fixed-income stream for many investment portfolios.
Since muni bond interest is exempt from federal taxes, muni ETFs are a good way for investors seeking tax-exempt income, especially those in higher tax brackets. Due to its tax-exempt status, the asset category is also best utilized in taxable accounts.
“Risks have been modestly rising in the municipal market, but they are not yet at a level which would cause MAAX to reduce its credit and/or duration exposure,” “Heightened levels of risk is being measured in the volatility of the 10-year U.S. Treasury Note and the ratio of muni yields to Treasury yields. For now, MAAX remains overweight both credit and duration, and it will maintain those exposures until additional risks arise.”
MAAX’s holdings include the VanEck Vectors High-Yield Municipal ETF (CBOE: HYD), VanEck Vectors AMT-Free Long Municipal Index ETF (CBOE: MLN), VanEck Vectors AMT-Free Intermediate Municipal Index ETF (CBOE: ITM) and the VanEck Vectors Short High-Yield Municipal Index ETF (CBOE: SHYD).
For more news on Muni Bond ETFs, visit our Muni Bonds category.