Bonds are generally lagging behind this year, with the Bloomberg U.S. Aggregate Bond Index down by 3% year-to-date as of April 2022. Municipal bonds are similarly affected, with the ICE AMT-Free US National Municipal Index showing a 1% decline since the year’s start. However, pockets of strength exist within the municipal bond space, particularly in high-yield offerings like the VanEck High Yield Muni ETF (HYD), which has seen nearly a 1% increase year-to-date. 

Despite the higher risk associated with high-yield bonds, HYD maintains a balanced risk profile, with a significant portion of its portfolio allocated to investment-grade bonds. Offering a 30-day SEC yield of 4.49%, HYD presents an attractive option for investors seeking enhanced yield opportunities, particularly those comfortable with added risk and in higher tax brackets. 

Overall, high-yield munis could serve as a credible alternative to junk corporate bonds, especially considering their relative resilience amid rising interest rates and the potential for enhanced returns compared to traditional municipal bond funds.

Finsum: Munis market is capitalizing on the current environment and investors don’t want to miss out. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.