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September 03, 2020High Yield Munis: Back on Track (5:03 )
Jim Colby
Jim Colby
Portfolio Manager and Strategist, Municipal Bonds
Portfolio Manager and Municipal Strategist Jim Colby examines the recent performance of high yield municipal bonds and discusses why ETFs are a suitable vehicle for gaining exposure to them.

Jenna Dagenhart: Hello and welcome to Asset TV. Joining us now to share his insights on high yield munis is Jim Colby. He’s Portfolio Manager and Municipal Strategist at VanEck. Jim, would you say that ETFs remain a good choice for investing in high yield munis?

Jim Colby: Hi, Jenna. Thank you for having me. My answer to that is, yes. VanEck has long held the position that municipal high yield is a very suitable vehicle for the ETF product. Since 2009 the inception date of HYD [VanEck Vectors High Yield Muni ETF], our flagship product, it has proven to be a very effective vehicle. Its prospectus driven by the index construction, and obviously the approval of the regulatory agencies to create a highly diversified portfolio detailing the opportunities that do exist in the municipal high yield universe.

Jenna Dagenhart: What about mutual funds? What's happened to high yield muni mutual funds?

Jim Colby: Well, Jenna, in 2020 for the first two months, I would say the mutual fund product and the passive ETF product in municipal high yield have followed a similar path, but for mutual funds at the end of the first quarter, in March and April of this year, they experienced stresses that probably haven't been experienced since the financial crisis of 2008. Outflows put great strain on liquidity that is embedded in our processes, both in mutual funds as well as ETFs.

So, the real crux of the question, I believe, is whether or not the funds did perform as anticipated and how they reacted to the moments of illiquidity that existed at the end of the first quarter.

Jenna Dagenhart: I’m glad that you mentioned performance. How have high yield munis performed?

Jim Colby: 2018 and 2019 performance for high yield munis has been very strong, and actually into the first two months of 2020, there was a continuation of a condition where demand outstrips supply. The demand for tax-exempt, high-yield income was greater than that of the issuers that bring product to the marketplace to provide. That imbalance created performance opportunity. Prices rose, and yields tended to subside.

Then came March and April. As most everybody knows, those were two very difficult months. We experienced outflows within the product line, both in mutual funds and ETFs, and a sense of concern and/or illiquidity was prevalent during those two months, in no great part due to the concerns about COVID-19, not only domestically, but worldwide. With an economic shutdown of our country, there was concern as to whether or not credit could stand up to the cessation of business activity, and revenues that come in and support the payment of the municipal bond marketplace. So, performance, since that time, the rebound has been strong, and performance is once again back on track, emulating the run that we’ve had in the past two calendar years. Can’t make a prediction, Jenna, where we’ll be at the end of this year, but we certainly have recovered a great deal of ground.

Jenna Dagenhart: Well, Jim, thank you so much for your time. Great to have you.

Jim Colby: Thanks, Jenna. Great to be with you.

Jenna Dagenhart: And thank you for watching. That was Jim Colby, Portfolio Manager and Municipal Strategist at VanEck. I’m Jenna Dagenhart with Asset TV.  To receive regular updates from VanEck’s experts, please visit

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