Muni Revenue Bond ETF is Outperforming

Fixed-income investors seeking diversified yield have looked to  municipal bonds, and within that segment, an infrastructure revenue bond-related ETF stands out.

The Deutsche X-Trackers Municipal Infrastructure Revenue Bond Fund (NYSEArca: RVNU) has gained 5.9% year-to-date, compared to the 4.3% gain in the broader investment-grade municipal bond market. RVNU also generated a 2.43% 12-month yield.

In the wake of the damages inflicted by the hurricane season, rebuilding efforts should help bolster economic activity, and the munis market could react favorably to the build out.

“The effects of Hurricane/Tropical Storm Harvey are unlikely to: 1) interrupt national municipal market outperformance; or 2) create a material break in strong southeastern Texas growth trends and/or related issuer credit quality improvements,” Matt Fabian of Municipal MarketAnalytics, told Barron’s. “To the extent local bonds cheapen by more than a few points, they will reasonably present value to both income and performance-oriented investors (meaning that, in this market, any depressed prices probably won’t last long).”

There are some fears that municipalities may default on debt obligations. However, the revenue-backed munis segment is tied to the success of projects they are funding.