Van Eck Global launches Market Vectors High-Yield Municipal index ETF

By Devika Patel

Knoxville, Tenn., Feb. 5 - Van Eck Global said in a press release it has formed a new exchange-traded fund that will focus on the high-yield segment of the municipal bond market.

The Market Vectors High-Yield Municipal index ETF seeks to replicate, as closely as possible, the price and yield performance of the Barclays Capital Municipal Custom High Yield Composite index.

The index has a 25% weighting in investment-grade triple-B bonds and a 75% weighting in below-investment grade bonds. In addition, 75% of the index is in bonds issued as part of transactions of at least $100 million in size.

The Barclays index provides exposure to a diverse array of high-yield municipal sectors, including health care, industrial development, special tax and airports, which had weightings of 21.4%, 14.7%, 13.5% and 13.5%, respectively, as of Dec. 31.

As of Jan. 31, the Barclays index had a market yield of 9.5%, versus 4% for the municipal market as a whole.

The ETF is listed on NYSA Arca under the symbol "HYD."

"Market Vectors is pleased to offer the first ETF in this segment of the municipal bond market," Van Eck Global principal Jan van Eck said in the release. "HYD may be of potential interest to investors looking to augment their tax-free income through investments in high-yield municipal obligations, particularly since it offers compelling benefits when compared to individual bond purchases and traditional fund platforms.

"Although high-yield munis, like many other asset classes, have experienced sharp price declines in the current economic and financial climate, their current prices relative to historical default rates suggest considerable value."

Van Eck Global is a New York-based asset manager.

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