Market Vectors® Short Municipal ETF

After investors’ post-election U-turn, some tailwinds turned to headwinds for municipal bonds. Investors moved money out of bond funds amid expectations of a Fed rate hike.

In this series, we will shed light on Moody’s recent data report, US Municipal Bond Defaults and Recoveries, 1970–2016. Muni bond prices sparked in 2016, especially when President Trump announced his infrastructure spending plans.

The performance of municipal bonds has fallen since the 2016 election, as President Trump’s tax reform and infrastructure spending plans have caused some concern among investors.

With their high yields, low prices, and tax-efficient returns, muni bonds (HYD) (ITM) could be available to investors at a dirt cheap rate in the coming months.

The downfall for muni bonds (HYD) (ITM) (MLN) began in October 2016 after the muni market was flooded with new issues for state and local governments.

President-elect Donald Trump’s tax reforms could bring cheers from taxpayers, but the tax bracket changes may not be well received by muni bond investors.

In September 2016, VanEck introduced two new ETFs that provide exposure to intermediate-term municipal bonds.

With a longer duration of the intermediate bonds rate curve, ITML is best suited for investors who are uncertain about the movement of interest rates in the near future.

Immediate-term bonds (ITM) are better placed since investors take less of an interest rate risk.

As of September 30, 2016, ITMS has all of its investments in US dollar-denominated bonds with a credit rating of “A” or higher, thus ensuring lower risks.