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High Yields May Be Good News for This Bond ETF

BY | ETF Database
6:24 am ET 09/04/26 | 24 VIEWS
As advisors and experienced fixed income investors know, bond prices and yields move inversely to one another, meaning that when yields are high, prices have slipped. This may have some investors worried about buying bonds when yields are elevated, and it’s certainly a valid concern in today’s Treasury market. However, some experts view high yields on municipal bonds as sources of allure. It could also set the stage for opportunity with ETFs such as the ALPS BBH Intermediate Municipal Bond ETF (MNBD B-).In today’s topsy-turvy bond market, an actively managed ETF like MNBD may be all the more attractive to advisors and investors navigating the municipal bond landscape. See More: ALPS Spotlights 3 Funds for Volatility “Unlike in the Treasury market, muni investors are rewarded with higher yields by extending maturities, from the short term to the medium-to-long range centered around 20 years,” reported Randall Forsyth for Barron’s. “Also popular are muni bonds with 5% coupon interest rates that have final maturities of 20 years or more but are callable in 10 years or less, which provide attractive current income and defensive properties in a bearish (higher yield) debt market.”MNBD May Be MarvelousMNBD, which turned four years old in May, is pertinent against this maturity backdrop because it aims to beat the Bloomberg Municipal Bond 1-15 Year Blend Index. This flexibility gives MNBD a key advantage over passively managed competitors in today’s environment. As maturity and yield opportunities emerge among municipal bonds, MNBD can be responsive while equivalent passive ETFs are forced to remain in neutral. “Muni investors get higher current income, albeit at a premium bond price. On the other hand, these premium bonds tend to be more defensive in a rising yield environment,” noted Barron’s. “That’s less relevant to buy-and-hold investors, who prefer receiving higher current income up front and care less about losing the few points of premium when the bonds are called or mature.” Additionally, MNBD’s status as an active fund is advantageous at a time when the Federal Reserve isn’t providing clues about what its interest rate intentions are. According to CliftonLarsonAllen, “Interest rate policy and Treasury yields play a significant role in municipal bond valuations, making it important to understand how changing rate environments can affect both income potential and investment opportunities.” For more news, information, and analysis, visit the ETF Building Blocks Content Hub.

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