Bonds Don't Have to Be Boring: The VanEck XMPT ETF

Municipal bonds have given fixed income alternative mechanisms to generate income with ETFs that offer a monthly distribution. Funds like the VanEck Vectors CEF Municipal Income ETF (XMPT) are great exemplars.

The ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the S-Network Municipal Bond Closed-End Fund Index. The fund normally invests at least 80% of its total assets in investments from which the income is exempt from U.S. federal income tax (other than federal alternative minimum tax). It normally invests at least 80% of its total assets in securities of issuers that comprise the fund’s benchmark index. The CEFMX Index is comprised of shares of U.S.-listed closed-end funds.

“XMPT features impressive diversity of exposure, and also offers investors a way to gain access to some of the world’s most successful muni bond managers through a single ticker,” an ETF Database analysis said. “Moreover, because the methodology is designed to overweight CEFs trading at a discount to their NAV, this product may be able to deliver attractive current returns.”

“XMPT will be most appealing to investors in a higher tax bracket given the nature of the underlying holdings,” the analysis added further. “This ETF can be used in a number of different ways; it could have appeal as a tactical tool for establishing short term exposure to this segment of the bond market, and could also be useful as a longer-term core fixed income holding.”

XMPT Chart

Yields Are Ticking Higher

Per a CNBC report, Federal Reserve Chairman Jerome Powell noted recently that “the central bank would eventually roll back on its support programs.”

Treasury yields have been rising as of late, sparking investor concerns that more inflation may be on the horizon as the economy continues to heal from the pandemic.

“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell told NPR’s “Morning Edition.”

“We will very gradually over time and with great transparency, when the economy has all but fully recovered, we will be pulling back the support that we provided during emergency times,” he added.

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