Investors looking for income and some shelter from recent equity market volatility may want to consider municipal bonds and it appears some as a slew of related ETFs hit all-time highs on a rough day for markets last Friday.
One of those muni ETFs hitting a new record was the VanEck Vectors Municipal Allocation ETF (Cboe: MAAX).
MAAX, which launched last year, 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 muni market and includes five VanEck Vectors Municipal Bond ETF options.
Max Out With MAAX
MAAX holds other VanEck municipal bond ETFs and has recently been buoyed by the VanEck Vectors AMT-Free Long Municipal Index ETF (CBOE: MLN) and the VanEck Vectors AMT-Free Intermediate Municipal Index ETF (CBOE: ITM).
“Risk re-emerged in the market and sent the prices of bonds up, especially those with longer durations,” said VanEck in a recent note. “Within MAAX, top performing positions were investments in the VanEck Vectors AMT-Free Long Municipal Index ETF with a return of 2.75%, the VanEck Vectors AMT-Free Intermediate Municipal Index ETF with a return of 2.47%, and the Intermediate VanEck Vectors High-Yield Municipal Index ETF with a return of 2.20%. Its bottom performing position in investment grade high yield short-duration bonds still returned an impressive 1.95%.”
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. Current risk trends indicate it could be time to consider MAAX.
MLN seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Bloomberg Barclays AMT-Free Long Continuous Municipal Index. The index is comprised of publicly traded municipal bonds that cover the U.S. dollar-denominated long-term tax-exempt bond market.
MAAX’s allocations did not change in February. It remains overweight both credit and duration relative to its benchmark. This positioning allows MAAX to generate a significantly higher yield than that of its benchmark with the goal of de-risking the portfolio during periods of extreme risk,” according to VanEck.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.