HYD ETF

These four income-generating ETFs will attract more investors as interest rates decline.

Munis often rise in the months following Fed rate cuts, suggesting there is still time to get in on this play. The fund's California exposure bothers me less given how strong equity returns have been. This means personal income tax revenues in the state will rise next year. High yield munis default less than comparable corporates, supporting positions in this fund.

VanEck High Yield Muni ETF offers high-yield, tax-free income by focusing on municipal bonds, making it attractive for investors in higher tax brackets. The HYD ETF's diversified portfolio includes 1,475 holdings and a 30-day SEC yield of 4.2%, with a taxable equivalent yield of 6.73% for top tax brackets. The fund's broad sector and geographic allocation, with a significant portion in California, adds stability but also focuses risk on specific states.

With the help of a brief flight-to-safety trade and hopes that the Federal Reserve will soon cut interest rates, perhaps by more than expected, bonds have gotten a lift. And muni bonds are participating in that upside.

VanEck High Yield Muni ETF is a simple muni bond index ETF. It offers investors a tax-advantaged 4.3% yield. Said yield is higher than average for a muni bond ETF. After-tax yields seem higher than average, too, depending on the specific tax rate.

In this evaluation, I examine the VanEck Vectors High Yield Municipal Index ETF as a potential investment at its present market value. Despite recent positive returns in this area, I anticipate a less optimistic outlook in the near future. Municipal bonds currently provide greater yields compared to high-yield corporate bonds over the past ten years. However, it is important to consider that inflation and Federal Reserve rates are also relatively high.

By Dylan Desai, Associate Product Manager This blog addresses frequently asked questions on high-yield municipal bonds and the VanEck High Yield Muni ETF (HYD). This blog is intended to answer frequently asked questions on high-yield municipal bonds and, more specifically, the VanEck High Yield Muni ETF (HYD).

The article evaluates the VanEck Vectors High Yield Municipal Index ETF (HYD) as an investment option at its current market price. I prefer HYD over leveraged CEF options to reach for more income in the muni sector. This is because the yield curve remains inverted, challenging the expenses those CEFs will charge. I recommend holding HYD in a portfolio due to its make-up and diversity. But this is particularly true for individuals with high tax rates.

Muni  bonds haven't been spared in what's shaping up to be another year of weakness for the broader bond market. For example, the widely followed ICE AMT-Free US National Municipal Index is down 1.07% year-to-date as of Nov. 3.