Among the major defaults in 2016, four were attributed to Puerto Rico, which continues to wrestle with shaky finances. Moody’s anticipates Puerto Rico’s number of individual defaults to rise in 2017, totaling as high as $64.3 billion by the end of the year.
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The defaults have a greater effect on the high-yield muni market, but high-yield munis like the VanEck Vectors High Yield Municipal Index ETF (NYSEArca: HYD) include attractive yields to somewhat cushion any potential pullbacks. HYD shows a 3.96% 30-day SEC yield, or a 6.55% taxable equivalent 30-day SEC yield.
Alternatively, bond investors can still enjoy stable and attractive yields through investment-grade municipal bond exposure through options like the VanEck Vectors AMT-Free Intermediate Municipal Index ETF (NYSEArca: ITM) to diversify their fixed-income portfolios with a tax-exempt offering. ITM has a 6.92 year effective duration and a 1.93% 30-day SEC yield, or a 3.19% taxable equivalent yield.