• Youtube

Van Eck Global - Since 1955


/uploadedImages/About_Van_Eck/Investment_Teams/jamescolby.jpg  

JAMES COLBY

Portfolio Manager and Senior Municipal Strategist, responsible for Market Vectors municipal bond investments
Full Bio>> 

CALENDAR of POSTS

<< June 2013 >>
Sun Mon Tue Wed Thu Fri Sat
            1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30            

MUNICIPAL-ORIENTED ETFs

CEF Municipal Income ETF* XMPT 
High-Yield Municipal Index ETF HYD 
Intermediate Municipal Index ETF ITM 
Long Municipal Index ETF MLN 
Pre-Refunded Municipal Index ETF PRB 
Short Municipal Index ETF SMB 
*XMPT is a “fund of funds” and is subject to the risks of the underlying funds’ investments.
 

Register & Subscribe

email address password

Value In Plain Sight - Wednesday, 06/20/2012

The secondary market for municipal bonds has been somewhat subdued the past several days. The broad market successfully absorbed over $10 billion in new issues last week, with some selling of high-grade muni bonds in the secondary market, possibly to fund purchases or restructure segments of existing portfolios. Municipal bond yields have been moving slightly lower but have generally underperformed U.S. Treasuries, which I believe makes their relative valuations look all the more appealing to non-traditional managers looking for potential trading opportunities.

The table below shows the ratios of AAA municipal bonds to U.S. Treasuries as of 6/14/2012, based on the Municipal Market Data (MMD scale).1 With nominal yields of municipals currently well above those of U.S. Treasuries, in my opinion this suggests that municipal bonds must be in the discussion as an attractive near-term choice for inclusion in portfolio allocation models. I currently see value in the 7 to 15 year maturity range, accessible through the Market Vectors Intermediate Municipal Index ETF (NYSE Arca: ITM).
 

 Maturity 

MMD Ratio to Treasuries (%) 

1 Year

116.27

2 Year

110.43

5 Year

111.27

7 Year

121.50

10 Year

117.39

15 Year

131.86

20 Year

130.51

25 Year

127.09

30 Year

116.48

Source: Municipal Market Data as of 6/14/2012

1In the municipal bond market, the accepted measure for the risk-free rate is the triple-A scale published by Municipal Market Data every day at 3:00 PM (commonly referred to as the MMD scale).  

 jim_colby_signature 

 

 

Authored by James Colby

Important Disclosure 

Van Eck Associates Corporation does not provide tax, legal or accounting advice. Investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service.

Please note that the information herein represents the opinion of Jim Colby and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Global. © 2013 Van Eck Securities Corporation. MUNI NATION is a service mark of Van Eck Associates Corporation.

All indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.

Any discussion of specific securities mentioned in the commentary is neither an offer to sell nor a solicitation to buy these securities.

Municipal bonds are subject to risks related to litigation, legislation, political change, conditions in underlying sectors or in local business communities and economies, bankruptcy or other changes in the issuer’s financial condition, and/or the discontinuance of taxes supporting the project or assets or the inability to collect revenues for the project or from the assets. Bonds and bond funds will decrease in value as interest rates rise. Additional risks include credit, interest rate, call, reinvestment, tax, market and lease obligation risk. High-yield municipal bonds are subject to greater risk of loss of income and principal than higher-rated securities, and are likely to be more sensitive to adverse economic changes or individual municipal developments than those of higher-rated securities. Municipal bonds may be less liquid than taxable bonds.

The income generated from some types of municipal bonds may be subject to state and local taxes as well as to federal taxes on capital gains and may be subject to alternative minimum tax.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR | 888.658.8287. Please read the prospectus and summary prospectus carefully before investing.  

Not FDIC Insured — No Bank Guarantee — May Lose Value 

Van Eck Securities Corporation, Distributor
335 Madison Avenue, 19th Floor
New York, NY 10017
888.MKT.VCTR | 888.658.8287

 

 

© 2013 Van Eck Securities Corporation. All rights reserved.