Munis Positioned to Shine in 2023 | ETF Trends

Municipal bonds now offer yields not seen in more than a decade (aside from a spike at the onset of the pandemic). Investors need to pay attention to these higher income levels as they consider portfolio positioning for 2023. In addition to attractive yields, supportive market dynamics, resilient credit quality, and important tax benefits make munis a key asset class to own.

In the upcoming webcast, Munis Positioned to Shine in 2023, Michael Cohick, director of product management at VanEck; and Tamara Lowin, senior analyst, municipal bonds at VanEck, will outline opportunities in the municipal bond market and highlight strategies to help financial advisors diversify back into this fixed income category.

For example, the VanEck Vectors AMT-Free Intermediate Municipal Index ETF (CBOE: ITM) has been a go-to option for many bond investors seeking munis exposure. ITM seeks to replicate the performance of the ICE Intermediate AMT-Free Broad National Municipal Index (MBNI), which is intended to track the overall performance of the U.S. dollar-denominated intermediate-term tax-exempt bond market.

The VanEck Vectors High Yield Muni ETF (HYD) is a high-yield option for investors looking for enhanced yield opportunities. HYD seeks to replicate the performance of the ICE Broad High Yield Crossover Municipal Index (MHYX), which is intended to track the overall performance of the U.S. dollar-denominated high-yield long-term tax-exempt bond market.

The VanEck Vectors Municipal Allocation ETF (Cboe: MAAX) can provide maximum long-term after-tax return consisting of capital appreciation and income generally exempt from federal income tax. In pursuing long-term total return, the fund seeks to reduce duration and/or credit risk during appropriate times by allocating primarily to VanEck municipal exchange traded products that invest in tax-exempt bonds.

In addition, the VanEck Vectors CEF Municipal Income ETF (XMPT) seeks to replicate the performance of the S-Network Municipal Bond Closed-End Fund Index (CEFMXTR), which is intended to track the overall performance of the U.S.-listed closed-end funds that invest in U.S. dollar-denominated tax-exempt market.

“The biggest concern for municipal bond investors is what the Fed will actually do with rates over the rest of 2022 and all of 2023. The underlying strength of municipalities from the strong economy of Q1 2018-2020 and the financial support from the government’s COVID-19 response means credit will be fine for a while yet. If the Fed signals that economic expansion has slowed, investors will return for the tax-free income,” according to James Colby, portfolio manager and strategist, municipal bonds.

Financial advisors who are interested in learning more about the munis market can register for the Thursday, January 12 webcast here.