NEW YORK--(BUSINESS WIRE)--
Market Vectors ETFs today announced the launch of its newest exchange-traded fund (ETF), Market Vectors® Short High-Yield Municipal Index ETF (NYSE Arca: SHYD). This fund is the latest addition to Market Vectors’ robust family of municipal income-focused exchange-traded funds and the first ETF to track an index that provides targeted exposure solely to the shorter end of the municipal yield curve.
SHYD seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Barclays Municipal High Yield Short Duration Index (ticker:ticker::BMHYTR), a market size weighted index composed of publicly traded municipal bonds that cover the U.S. dollar-denominated high yield short-term tax exempt bond market. To be included in the index, a bond must have a nominal maturity of 1 to 10 years. Taxable municipal bonds, bonds with floating rates, and derivatives are excluded from the index. The index rules maintain a 75 percent weight in below investment grade municipal bonds and as an added liquidity feature a 25 percent weight in Baa/BBB- rated investment grade municipal bonds.
“The shorter duration focus of SHYD may lessen the impact of a rising rate environment making this a potentially useful tool for investors and advisors who are looking for ways to position their fixed income portfolios in today’s uncertain rate climate,” said Michael Cohick, Product Manager with Market Vectors. “High yield municipal bonds continue to have historically low default rates versus their corporate counterparts and deliver income that is generally exempt from income taxes. With all this in mind, we’re very pleased to be adding SHYD to our fund family.”
Cohick noted that credit spreads between investment grade and high yield short duration municipal bonds tend to be wider than the spreads found among longer maturity municipal bonds. For example, the spread between investment grade and high-yield municipal bonds with 2-to 4-year maturities was 4.40 percent as of Jan 10, 2014, according to Barclay’s index data on Bloomberg. By way of comparison, the spread figure was 3.27 percent for 8-to 12-year municipal bonds and 2.45 percent for 22+ year municipal bonds. A wider spread in shorter maturities, as is presently the case, may act as a cushion during times of rising interest rates, given that spreads have more room to tighten, potentially lessening the impact of declining bond prices.
SHYD joins the Market Vectors fund family that includes Market Vectors High-Yield Municipal Index ETF (NYSE Arca: HYD), which has gathered approximately $794 million in assets as of December 31, 2013. HYD tracks an underlying index that takes an “all-maturity” approach to the high yield municipal bond space.
“HYD’s approach, which includes bonds with maturities ranging from 1 to 30 years, can make it more interest rate sensitive than SHYD with its shorter duration focus,” added Cohick. “However, for a steady or falling rate environment, HYD may continue to offer a means of maximizing yield potential from across the broad high yield municipal yield curve.”
Market Vectors notes that investing in high-yield municipal bonds is not without risks, including risks related to litigation, legislation, political changes, local business or economic conditions, conditions in underlying sectors, bankruptcy or other changes in the financial condition of the issuer, and more.
Market Vectors was one of the first fund providers to provide a full suite of municipal bond ETF offerings, with funds that target every point on the risk/return spectrum, including: CEF Municipal Income ETF (NYSE Arca: XMPT), Intermediate Municipal Index ETF (NYSE Arca: ITM), Long Municipal Index ETF (NYSE Arca: MLN), Pre-Refunded Municipal Index ETF (NYSE Arca: PRB), and Short Municipal Index ETF (NYSE Arca: SMB).
SHYD has a total annual operating expense ratio of 0.35 percent.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes.
All Market Vectors municipal ETFs are subject to risks including those related to litigation, legislation, political changes, local business or economic conditions, conditions in underlying sectors, bankruptcy or other changes in the financial condition of the issuer, and/or the discontinuance of the taxation 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 risk, interest rate risk, call risk, lease obligations, tax risk. SHYD, HYD and XMPT are subject to risks associated with non-investment grade (high yield) securities. High yield bonds may be subject to a greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. XMPT’s performance, because it is a fund-of-funds, is dependent on the performance and risks of the underlying funds. XMPT’s shareholders will indirectly bear the expenses of the underlying funds. The securities of closed-end investment companies in which XMPT will invest may be leveraged.
The market for municipal bonds may be less liquid than for taxable bonds. There is no guarantee that a Fund’s income will be exempt from federal or state income taxes. Federal or state changes in income or alternative minimum tax rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Capital gains, if any, are subject to capital gains tax. Please refer to a funds’ prospectus for complete risk information. A portion of the SHYD’s and HYD’s dividends may be subject to federal, state, or local income taxes or may be subject to the federal alternative minimum tax.
The Barclays Municipal High Yield Short Duration Index is calculated and maintained by Barclays Inc. Barclays Inc. does not sponsor, endorse, or promote the Funds and bears no liability with respect to any such Funds or security. The “Net Asset Value” (NAV) of a Market Vectors exchange-traded fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
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 a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. 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, New York, NY 10017
- municipal bonds
Mike MacMillan/Chris Sullivan, 212-473-4442