Van Eck Global has announced the launch of a new ETF to track the high-yield municipal bond market. This is under its Market Vectors program and is called the High-Yield Municipal Index ETF (NYX: HYD). This looks like the first ETFdesigned to track the high-yield municipal bond sector. This willallow investors to trade a basket of muni’s without having to conductdue diligence on individual bond issuers.
The ETF’s totalnet expenses are 0.35%. It is designed to track the performance of theBarclays Capital Municipal Custom High Yield Composite Index.
The index is weighted 75% in bonds with ratings under the "BBB" markfor junk bonds, and has a 25% weighting in BBB-rated bonds. Of thenon-investment grade weightings, some 31.2% are non-ratedsecurities. Some 75% of the index is in bonds issued as part oftransactions of at least $100 million in size.
As of December 31, the fund had the following sub-sector weightings inmunicipal issues: health care 21.4%, industrial development 14.7%,special tax 13.5% and airports 13.5%. Its market yield was also 9.5%rather than about 4% for the muni market as a whole.
Jon C. Ogg
February 5, 2009